Weak jobs report, good news

The US Bureau of Labor Statistics (BLS) released the Employment Situation report for June yesterday. Unemployment rate edged down to 4.2% (from 4.3% in May). You can see it on the top chart below. The number of unemployed people was little changed at 7.1 million. This drop was largely driven by a decline in the labor force participation rate, which fell 0.3 percentage points to 61.5% as you can see in the middle chart below (a five-year low). The employment to population ratio edged down to 59.0%. Total nonfarm payroll employment increased by a modest +57,000 in June. This was well below economists’ consensus expectations (around 110,000–115,000) and slower than the prior months’ revised figures. On top of that, the April numbers were revised down to +148,000 (from +179,000); May was revised down to +129,000 (from +172,000). Combined downward revision of 74,000 jobs for the two months. This is becoming a very convenient trick. Numbers are presented as strong in the first report and are predictably and consistently revised down in the revisions, when investors pay less attention as they consider them (and rightfully so) yesterday’s news. But the trend is today’s news, and the labor market is not as healthy as it seems. And the bottom chart below, tells the story of the lives of the unemployed. Unemployment subsidies in the U.S. fade away after 26 weeks, and the percentage of long terms unemployed is already 27% of the unemployed, and rising. There are 7.1 million people unemployed in America. That means that 2 million people (27% of 7.1 million) will vote in November’s mid term elections, and might not be happy with the current administration economic agenda, since they need a job, are looking for it, and can’t find it.

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