Three Takeaways From the June Jobs Report: Mohamed A. El-Erian

08 July, 2018, 16:54 | Author: Regina Silva
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The report showed little, if any, evidence of tariff-related weakness in the economy, especially with continued strength in goods-producing jobs: Manufacturing added 36,000 to payrolls, the best month since December, including a 12,000 increase in the auto industry, the most since August.

Therefore, June's level of total U.S.jobs is now +250,000 (i.e., the sum of 213,000 and 37,000) versus what was reported by the BLS a month ago.

The unemployment rate ticked up to 4% from 3.8%, but this was because more people entered the labour force looking for work.

A long run of impressive monthly job creation is among the main reasons why the projections of economists, in both the private and public sectors, have continued to be bullish for US growth, despite growing uncertainty about the rest of the global economy and the threat of a trade war.

The employment increase last month beat economist expectations for a 20,000 gain and was the second highest so far in a year where job creation has been sluggish.

"This is a good job-creation number, but on the other hand we see still continued soft wage growth", said Michael Feroli, chief USA economist at JPMorgan Chase. But for now the sector, which accounts for about 12 percent of the USA economy, appears in good health.

Ian Shepherdson, chief economist of Pantheon Macroeconomics, said "we can't stress enough that all the numbers from the household survey are so volatile that they're essentially meaningless on a month-to-month basis". Wages increased by 0.2 percent from May to June of this year, and 2.7 percent since June 2017.

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The monthly Labor Department report painted a less sanguine picture for workers' paychecks.

"Healthy" rise in the unemployment rate: Even though it was expected to decline, the unemployment rate rose to 4 percent from 3.8 percent.

The gain in USA total employment through the first half of this year has been 1.3 million jobs.

The labor force expanded by 601,000 jobs over the month, with an influx of new women and teen workers more than offsetting a dip in labor force participation among men, said Gregory Daco of Oxford Economics.

Construction payrolls rose by 13,000 last month after rising by 29,000 jobs in May. With upward revisions to the data from the prior two months, the average gain over the last three months was 211,000.

Just hours before the monthly reports came out, the Trump administration imposed tariffs on $34 billion worth of Chinese imports, prompting the Asian country to immediately reiterate. "Not only did payroll employment increase by 213,000 - evidence that employers are finding workers - but wage growth held steady at a disappointing 2.7 percent - evidence that employers are not having to raise wages to attract and retain workers".

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