June Job Creations Beat Expectations Yet Unemployment Rate Increases

The Bureau of Labor Statistics (BLS) reported that there were 850,000 jobs created in June, which was stronger than expectations of 700,000 new jobs. In addition, there were slight positive revisions to April and May in the amount of 15,000 more jobs in those months combined.

Note that there are two reports within the Jobs Report and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it’s based predominately on modeling.

The Household Survey, where the Unemployment Rate comes from, is done by actual phone calls to 60,000 homes. The Household Survey also has a job loss or creation component, and it showed there were 18,000 job losses while the labor force increased by 151,000. The number of unemployed people also increased by 168,000, causing the Unemployment Rate to rise from 5.8% to 5.9%.

June’s data is a perfect example of how the Jobs Report can be a tale of two reports, where we can see disparity in job creations between both surveys.

In addition, it’s important to further analyze these numbers, as the true Unemployment Rate is actually higher than the headline figure. That’s because people who are not able to look for work due to pandemic reasons, and who are still unemployed, are not counted. And that number equates to 1.6 million people. When we add this into the calculations, along with the lingering misclassification error (where people were classified absent from work for other reasons and not marked as unemployed on temporary layoff when they should have been), the real Unemployment Rate is around 7%.

Wages were on the rise, as average hourly earnings were up 0.3% in June after rising 0.5% and 0.7% in May and April, respectively. Year over year, these figures were up by 3.6%.

Average weekly earnings, which we focus on more because it measures what people actually take home, were basically unchanged after rising 0.5% and 1% in the previous two months. Average weekly earnings were unchanged due to the decline in hours, likely due to the manufacturing sector where there are not enough parts to keep people working. Year over year weekly earnings are up 4%, but if you extrapolate the last 3 months’ numbers over the course of the year, weekly earnings would increase by 6%.

And of note, leisure and hospitality wages increased by 1% month over month after rising more than 1% in May as businesses in those sectors ponied up to try to get much needed staff to return to work.

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