Two days, two jobs reports, two blowouts. Investors barely managed to digest yesterday's positive ADP jobs report before a holiday-shortened schedule rushed the U.S. Bureau of Labor Statistics' (BLS) monthly employment situation report to the public this morning. Analysts and economists were looking for a net gain of 215,000 jobs in June, but were blown away by a strong set of data from the BLS.
There was very little to quibble over in June's key statistics:
- Nonfarm payroll employment grew by 288,000 new jobs.
- Data for April and May were revised up by a combined 29,000 new jobs.
- The unemployment rate dropped to 6.1%, its lowest level since mid-2008.
- There are 1.2 million fewer long-term (27+ weeks) unemployed people now than there were a year ago.
- Average hourly earnings have grown 2% in the past year to $24.45.
It should come as no surprise, then, that the news drove the Dow Jones Industrial Average (DJINDICES:^DJI) past the 17,000-point barrier and close to a triple-digit gain by the close of trading at 1 p.m. Gains were broadly distributed, with only four losers (none of which sank by more than 0.3%) and solid gains across the Dow's six financial components, led by a 1.5% pop in Goldman Sachs (NYSE:GS). Investors and analysts were not expecting this level of strength from the BLS report, particularly after ADP overcorrected its weak May results with figures that seemed inflated at first glance. But if anything, ADP nailed it, with only 7,000 jobs separating the two reports.
The June report marks the fifth-consecutive month in which the American economy added over 200,000 new jobs, and it's the second-strongest monthly gain in over two years, behind only the 304,000 jobs added in April after today's revisions. The report also helps push the three-month average of job growth to its highest level since early 2012; the past six months have now averaged more job growth than we've seen since 2006:
While unemployment remains elevated above pre-crisis levels, it's encouraging to see that long-term unemployment is falling fast from the historic highs it reached in 2009 and 2010. There are now nearly 1.2 million fewer long-term unemployed -- those who haven't found work for at least 27 weeks -- than there were a year ago; June alone saw 293,000 people leave the ranks of the long-term unemployed:
Additionally, the median duration of unemployment continues to drop rapidly, from 25 weeks coming out of the recession to just 13.1 weeks today. Unfortunately, this good news hides a deeper problem. While some of the long-term unemployed certainly have found jobs at last, there were also 111,000 fewer people in the labor force in June than in May. All told, 2.3 million fewer people are unemployed now than a year ago, but 2.4 million fewer people are part of the labor force. In any given month, much of the improvement in unemployment figures can simply be chalked up to the fact that fewer people are choosing to look for work:
More worrisome still, full-time employment suffered its third-largest single month-over-month decline -- 523,000 full-time jobs were lost -- since the recession ended, while a stunning 799,000 new part-time jobs were tallied in June. Part-time workers again account for more than 18% of the total workforce, a level that has remained relatively stable since the recession, despite efforts to deny the truth that this is a "part-time" recovery. Part-time jobs had been in rapid decline over the past year, but June's spike cancels out that shift. There are now almost exactly as many part-time workers (28 million) as there were a year ago:
Shrinking unemployment and growing payrolls are always good signs for a stronger economy. However, the nature of these changes matters. If unemployment is low primarily due to labor force dropouts, and if employment growth is being driven by hundreds of thousands of low-earning part-time workers rather than growth in valuable and fairly remunerative full-time positions, the American economy will have a harder time getting back to "normal," whatever that might mean.