The government announced July 8 that the U.S. economy created a whopping 287,000 jobs in June, welcome news after the May report of a mere 38,000 new jobs. What’s the takeaway from the latest employment data? The good news is that job growth momentum is still positive, though slowing, and the U.S. remains at or very near full employment. The less-good news is that national economic growth, the real engine of job creation, appears to be sputtering.  

Human Resources Legislation

INTELLIGENCE FOR HCM PROFESSIONALS

Stay Informed About Changing Compliance Regulations & Workforce Trends
Read the HR Legislation Blog to stay on top of complex HR & Payroll policy issues

Jobs Report: Snapback!

Fri Jul 8, 2016

The government announced July 8 that the U.S. economy created a whopping 287,000 jobs in June, welcome news after last month’s report that a mere 38,000 new jobs had been created in May.

Indeed, the new release downgraded the paltry May numbers to a net gain of 11,000 jobs, an abrupt stall in job creation and a striking contrast with the latest figure.

The headline unemployment rate was positive—coming in at 4.9 percent, an uptick from May’s 4.7 percent, but about as close to “full employment” as it can get.

Like long-ago readers of tea leaves, economists were left scratching their heads about which of the two months was the aberration: May, with essentially no new jobs, or June, with its robust 287,000 new hires. The former seemed to signal recession; while the latter suggests solid economic momentum.

Averages being the refuge of statisticians and baseball players, looking at average monthly job creation helps solve the puzzle: for all of 2015 the economy created an average of 230,000 jobs a month. For the first three months of 2016 the monthly average slipped to 195,000, while over the past three months the average came in at 147,000 new jobs per month. Notwithstanding the June bounce, the trend is down.

The U.S. economy, facing strong headwinds from abroad and an expansion that, while subpar, has continued for an extraordinary seven years, may be losing steam.

Broader economic data seem to confirm a slowing. The economy grew at an annual rate of only 1.1 percent in the first quarter of 2016, down from 1.4 percent in the 2015 fourth quarter and 2 percent in the third.

Productivity growth likewise seems to be signaling a downshift, posting average increases of less than 1 percent annually since 2013 and an actual labor productivity decline of 0.6 percent in the first quarter of 2016.

What’s the takeaway from the latest employment data? The good news is that job growth momentum is still positive, though slowing, and the U.S. remains at or very near full employment. The less-good news is that national economic growth, the real engine of job creation, appears to be sputtering.

Compared to May’s 11,000 new jobs the June figure of 287,000 is like a ray of sunshine. But clouds are on the economic horizon. If only we could read the tea leaves!