NFP: U.S. Adds 213K vs 195K Jobs Expected In June

by Ike Obudulu Posted on July 6th, 2018

Washington, DC, USA: Payrolls exceeded expectations at 213000 in June and the unemployment rate rose from 3.8% to 4%, compared with the 195,000 median estimate in a survey of economists, U.S. Bureau of Labor Statistics figures showed Friday.

Job growth occurred in professional and business services, manufacturing, and health care, while retail trade lost jobs.

Job gains were 37,000 more than previously reported in April and May. After revisions, job gains have averaged 211,000 per month over the past three months.

The unemployment rate, which is calculated from a separate survey, rose from 3.8% to 4% as 600,000 Americans, including many discouraged workers on the sidelines, streamed into a favorable job market, the Labor Department said Friday.

The economy has added jobs for 92 straight months, beginning in October 2010 under President Obama, the longest streak on record.

But Trump’s strategy to levy tariffs on close U.S. allies has led to massive retaliation against U.S. exports. On Friday, the U.S. and China exchanged tariffs of $34 billion on each other’s exports, with billions more expected to come in the months ahead.

A report released Thursday by private payroll processor ADP showed that American companies added 177,000 workers last month, fewer than the 189,000 added in May.

But amid the labor market’s expansion there is growing concern about the shrinking labor pool with the unemployment rate expected to head toward historically low levels of 3 percent.

The Federal Reserve said in the minutes from its June meeting that some businesses had expressed concern about the “possible adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity.”

The Fed indicated that companies “indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy.”

Household Survey Data : Nonfarm Payroll (NFP)

The unemployment rate rose by 0.2 percentage point to 4.0 percent in June, and the number of unemployed persons increased by 499,000 to 6.6 million. A year earlier, the jobless rate was 4.3 percent, and the number of unemployed persons was 7.0 million.

Among the major worker groups, the unemployment rates for adult men (3.7 percent), adult women (3.7 percent), and Asians (3.2 percent) increased in June. The jobless rate for teenagers (12.6 percent), Whites (3.5 percent), Blacks (6.5 percent), and Hispanics
(4.6 percent) showed little or no change over the month.

Among the unemployed, the number of job losers and persons who completed temporary jobs increased by 211,000 in June to 3.1 million, and the number of re-entrants to the labor force rose by 204,000 to 2.1 million. (Reentrants are persons who previously worked but were not in the labor force prior to beginning their job search.)

The number of long-term unemployed (those jobless for 27 weeks or more) increased by 289,000 in June to 1.5 million. These individuals accounted for 23.0 percent of the unemployed.

In June, the civilian labor force grew by 601,000. The labor force participation rate edged up by 0.2 percentage point over the month to 62.9 percent but has shown no clear trend thus far this year.

The employment-population ratio, at 60.4 percent, was unchanged in June and has essentially been flat since February.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in June at 4.7 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In June, 1.4 million persons were marginally attached to the labor force, little different from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 359,000 discouraged workers in June, down by 155,000 from a year earlier. (Data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.1 million persons marginally attached to the labor force in June had not searched for work for reasons such as school attendance or family responsibilities.

Establishment Survey Data : Nonfarm Payroll (NFP)

Total nonfarm payroll employment increased by 213,000 in June and has grown by 2.4 million over the last 12 months. Over the month, job gains occurred in professional and business services, manufacturing, and health care, while employment in retail
trade declined.

Employment in professional and business services increased by 50,000 in June and has risen by 521,000 over the year.

Manufacturing added 36,000 jobs in June. Durable goods manufacturing accounted for nearly all of the increase, including job gains in fabricated metal products (+7,000), computer and electronic products (+5,000), and primary metals (+3,000). Motor vehicles and parts also added jobs over the month (+12,000), after declining by 8,000 in May. Over the past year, manufacturing has added 285,000 jobs.

Employment in health care rose by 25,000 in June and has increased by 309,000 over the year. Hospitals added 11,000 jobs over the month, and employment in ambulatory health care services continued to trend up (+14,000).

Construction employment continued to trend up in June (+13,000) and has increased by 282,000 over the year.

Mining employment continued on an upward trend in June (+5,000). The industry has added 95,000 jobs since a recent low point in October 2016, almost entirely in support activities for mining.

In June, retail trade lost 22,000 jobs, largely offsetting a gain in May (+25,000). Employment showed little or no change over the month in other major industries, including wholesale trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in June. In manufacturing, the workweek edged up by 0.1 hour to 40.9 hours, and overtime edged up by 0.1 hour to 3.5 hours. The average workweek for production
and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours.

In June, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.98. Over the year, average hourly earnings have increased by 72 cents, or 2.7 percent. Average hourly earnings of private-sector production and nonsupervisory
employees increased by 4 cents to $22.62 in June.

The change in total nonfarm payroll employment for April was revised up from +159,000 to +175,000, and the change for May was revised up from +223,000 to +244,000.

With these revisions, employment gains in April and May combined were 37,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the
recalculation of seasonal factors.)

After revisions, job gains have averaged 211,000 per month over the last 3 months.

Market Reaction to Nonfarm Payroll (NFP) Report

U.S. stock-index futures pared their losses to turn slightly positive on Friday, after a report on the labor market in June showed better headline employment figures than had been estimated. Dow Jones Industrial Average futures YMH9, -0.35% rose 0.2%, while S&P 500 futures ESH9, -0.09% were up less than 0.2%. Nasdaq-100 futures NQH9, +0.13% added 0.1%. In the report, 210,000 jobs were added last month, above the 200,000 that had been expected. The unemployment rate also rose to 4% from 3.8%. Futures had been pointing to a lower open prior to the release of the report, following the implementation of much-anticipated import tariffs by the Trump administration and China.

Nonfarm Payroll (NFP) Report

The Nonfarm Payroll (NFP) report is released on  the first Friday of every month at 8:30 AM ET (Eastern Time) by the U.S. Bureau of Labor Statistics. NFP is a highly anticipated economic report which signals the strength of the US economy. It reveals the health of the jobs market, which filters down into inflation

It is closely analysed to predict Gross Domestic Product (GDP) growth and inflation rates and has the power to move global financial markets.

Economic indicators in the NFP report that markets and policy makers care about the most are Non-Farm Employment Change, Average Hourly Earnings and the Unemployment Rate:

Non-Farm Employment Change

Non-Farm Employment Change measures change in the number of employed people during the previous month, excluding the farming industry. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity

Average Hourly Earnings

The wages growth data, Average Hourly Earnings, measures change in the price businesses pay for labor, excluding the farming industry. It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer;

Unemployment Rate

Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month.

Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.

Unemployment is also a major consideration for those steering the country’s monetary policy, especially the Federal Open Market Committee, FOMC.

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