EmailFor the second consecutive month, nonfarm payroll growth underperformed expectations and stayed well below the 100,000 per month needed to maintain a stable unemployment rate. Nonfarm payrolls added only 18,000 jobs in June after adding a downwardly revised 25,000 (from 54,000) in May. The Briefing.com consensus expected nonfarm payroll growth of 80,000.
The lack of job growth should not be too shocking, except in relation to yesterday's stronger-than-expected ADP report. The initial claims level has remained above the upper bound (410,000) of our "Recovery Zone" for 12 of the last 13 weeks and above 400,000 during that entire time. Until claims fall below 410,000, it is unlikely that we will see sustained payroll growth above 100,000 per month.
Private payrolls added 57,000 jobs in June after adding a downwardly revised 73,000 jobs (from 83,000) in May. The consensus expected private payrolls added 110,000 jobs in June.
Most industries added only a few thousand new jobs in June. Losses were seen in construction (-9,000), nondurable goods manufacturing (-9,000), and financial activities (-15,000).
The unemployment rate edged up from 9.1% to 9.2% even though the labor force declined by 272,000 people. If the labor force had remained at May levels, the unemployment rate would have increased to 9.3%.
Average weekly hours ticked down to 34.3 hours from 34.4 and hourly earnings were flat.
Given the drop in average weekly hours, the flat hourly earnings, and the lackluster nonfarm payroll growth, wage income declined 0.3% in June. This does not bode well for a strong retail sales report.
