A couple fresh headline numbers for our Friday morning, and they are big and strong: 213K new jobs were created in the month of June, according to the Bureau of Labor Statistics' (BLS) monthly non-farm payroll report, and the new Unemployment Rate is 4.0%. Both numbers are higher than had been expected, and although we prefer to see the Unemployment Rate go down instead of up, the silver lining here is that more Americans are now entering this robust labor market, inferring our jobs strength may still have a way to go.
Even better, revisions to April and May rose 37K between to the two months - up to 175K in April and a whopping 244K new jobs in May. We also see a slight pop in the Labor Force Participation Rate to 62.9%, up 0.2% month over month, which further bears out the rise to 4.0% on headline unemployment. The U-6 (aka "real" unemployment) reached 7.8% last month - still historically low, but suggesting a bit more slack in our labor market overall.
Perhaps best of all (at least for Wall Street, not Main Street) is that wage growth ticked up only 0.2% month over month, amounting to year-over-year gains of 2.7%. Considering we are hovering near peak unemployment and averaging more than 200K new jobs per month over the past quarter, that we're not seeing a spike in labor costs higher than 0.2% is nothing short of a miracle (it also points to how toothless labor unions have become in America).
So we're cranking up new jobs in this country - 202K for June in the private sector alone - without having to pay much more for them. That's just about as Goldilocks as we can possibly get.
These figures may also spur analysts to update their Q2 GDP growth estimates, to the extent productivity might be predicted by overall labor numbers, which might send consensus up - perhaps as much as double Q1's 2.0% growth - for the quarter just ended, which would be a boon for the U.S. economy and another perceived feather in President Trump's cap. Regardless, as long as we see big gains month over month in Goods and Manufacturing, it stands to reason overall GDP is growing as well.
However, as good as these numbers look this morning and potentially will look when we get our first look at Q2 GDP late this month (July 27th), we are essentially looking backwards. In the here and now, the first week of calendar Q3, we are faced with a potentially dire trade war with China, the EU and other strong trading partners of ours. Seeing export taxes on small things like Kentucky bourbon and large things like General Motors GM automobiles and the majority of China's soybean supply would no doubt throw a wet blanket on the hot charts of productivity, economic growth and, ultimately, employment as well.
In short, these historic highs we are currently enjoying may be the peak of the mountaintop. Peering forward from here, most routes look to only be going down.
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