While the economy has entered its 64th consecutive month of private sector job growth the news isn’t all good. The Unemployment rate dropped again in June and is at its lowest since April of 2008 at 5.3%, down from 5.5% in May. However when we take into consideration that job gains for both April and May were revised down by a total of 62,000, the numbers may not be as good as they appear.
The labor force participation rate (the proportion of the population either working or looking for work) tumbled to 62.6%, which is the lowest in modern times. It also means that the proportion of Americans who have a job or are looking for one is at 1977 levels. The reality is there are either a lot of people who aren’t working or who have given up trying to look for work.
No progress toward rising wages as average hourly earnings were unchanged in June. What had been a 2.3% annual growth rate in hourly earnings in May fell to 2% in June. It’s a strong sign that employers aren’t feeling much pressure to raise pay to attract employees. Over the last 12 months, wages are up 2%, only modestly ahead of inflation, which is running at around 1.5% and far below the goal for a healthy economy of 3.5% or more.
Workers in fields like insurance, software and marketing have especially been in high demand. Health care gained 40,000 jobs, professional and business services rose by 64,000 and Retail increased by 33,000. Employment in other major industries, including construction and manufacturing, showed little or no change over the month.
One can’t argue though that 223,000 newly added jobs is a victory. The very good news is that employers keep creating jobs and raising their entry-level wages while both state and local laws continue to increase the minimum wage in many places. Another key development last month was that Americans picked up their spending in May, the best monthly rise in spending since 2009.
In other words, America is regaining momentum, perhaps more slowly than expected, but it’s happening.