Shrinking Census Payroll Disguises Solid June Job Gains
Employment growth slowed sharply in June, but the slowing was concentrated in the public sector, where the disappearance of 190,000 temporary census jobs caused a large drop in government payrolls, the latest edition of the employment report shows. Private job growth rebounded strongly from May's decline.
Only 11,000 new nonfarm jobs were created in June, the
Bureau of Labor Statistics
reported this morning, the smallest gain since a 69,000 drop in January 1996. But while government payrolls lost a total of 195,000 jobs, private payrolls gained 206,000. May's decline in private-sector payrolls was revised to 165,000 from 116,000, making it the largest since April 1991.
Economists polled by
Reuters
had
expected a total June gain of 263,000, on average.
The June gain in private-sector payrolls is only slightly lower than the average pace of private-sector job growth over the 12 months ended in April -- 215,000. But the average pace has dropped to 191,000 in June.
Bond prices leapt higher in reaction to the initial report of such a small gain in overall payrolls, then retreated as traders got a look at the guts of the report. While the report certainly provides evidence that growth is slowing in reaction to the
Fed's six interest-rate hikes over the last year, the evidence is less conclusive than the headline number suggests.
Outside of the government sector, job growth was uniformly solid in June. Private services payrolls added 148,000 jobs, retail payrolls grew by 49,000, and the goods-producing sector added 13,000 jobs.
Meanwhile, the other components of the jobs report were less bullish from a monetary policy perspective. Average hourly earnings rose 0.4%, in line with the average forecast. The year-on-year growth rate held steady at 3.6%. A smaller-than-expected gain would have calmed fears of accelerating inflation.
And the unemployment rate dropped to 4.0% from 4.1%, also in line with expectations. A rise in the rate would have eased concerns about tight labor-market conditions putting upward pressure on wages and salaries.
An alternative measure of labor-market tightness, the
augmented unemployment rate, a new favorite indicator of Fed Chairman
Alan Greenspan's, also fell back to its April rate of 6.8%, as the pool of available workers fell 3.4% to 9.84 million, a new cycle low.
