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The American job market gave off mixed signals with its June jobs report, but all in all, if I owned that report, I’d be proud of it.
For sure, job growth has cooled off in the last few months, June coming in at 206,000. But we must look at that a few ways. First, it’s higher than expected – again. Almost universally, pundits and prognosticators continue to underestimate the job market, casting an unnecessary pall over everything. This understandably creates a negative attitude amongst job seekers and job creators alike. That’s pointless and needless.
Second, after three years of absolutely meteoric growth, what do you expect? No system, including the universe itself, can continue to grow at such exponential rates. If you ever raised a teenage boy, you know. Remember that year of the growth spurt? He left sixth grade at 5’7” and entered junior high school three months later at a hair under six feet tall. He might still have had some growing to do, but you wouldn’t have wanted it at that rate, or you’d soon have been clothing and feeding an eight-foot tall eighth grader – and probably an unhealthy one at that. Growth like what our job market experienced over the last three years was (a) remarkable, (b) unprecedented, and (c) unsustainable. But unlike job growths in the past that basically fell off a cliff at some point, our current cycle has merely levelled off while still exhibiting strength. Think of it as reaching cruising altitude.
Third, unemployment ticked up to 4.1%, inching above 4% for the first time since November 2021. Contrary to popular unenlightened belief, this is not bad news on a one-month basis. Unemployment rates rise when more people look for jobs and more either lose them or start looking for them. Simultaneously. That’s exactly the case today. In June, while the number of employed persons actually grew by 116,000, the civilian labor force grew the job market by 277,000 and the number of unemployed persons rose by 162,000. That 277,000 minus that 162,000 gives us that 116,000 (with a rounding error). What does that tell us? It says that 277,000 workers entered the job market not necessarily with a job but with confidence they will find one. That confidence factor has been driving the market all along. Over the course of a few months, these monthly numbers work themselves out. So the 4.1% number is, in the macro sense, no big deal. But it bears watching, for sure. In the meanwhile, it’s historically – and happily – low.
Fourth, amidst concern that 70,000 of those new jobs – almost exactly one-third – were in government, I offer this response: So what? Nobody seemed to object when dominant job growth took place in other sectors like health care, hospitality, or professional and business services. A job is a job, and it’s an honorable thing.
Finally and notably, wages continue to rise. The current rate of wage increase, 3.9%, once again significantly outpaces inflation, which is at 3.2%. Every industrialized nation on earth would trade their number for ours if they could.
The American job market rides again.
