United States: Employment Growth Is Holding Strong, but the Jobless Rate Continues to Climb

Job creation according to the establishment survey once again beat expectations—just 190,000 net hires were forecast— but the surprise is less dramatic than it was in May. Last month, the difference between the forecast and preliminary results was closer to 100,000. What's more, June's performance is largely offset by the downward revisions to the numbers for previous months: May's gains went from 272,000 in the first estimate to 218,000, while April's slid from 165,000 to 108,000.

The fact remains that the US labour market is doing quite well, at least according to the establishment survey. In the first half of the year, 1,334,000 jobs were created, a result that's in line with the good years of the economic cycle that preceded the pandemic.

And if we look closely at June's results, we can see that that the gains were fairly widespread. Of the 250 industries covered by the survey, the proportion where employment increased rose from 56.4% in May to 59.6% in June. This is the highest rate since January. Hires accelerated in construction, wholesale trade, and in state government, to name a few industries. But we're also seeing some decreases, particularly at retailers and in food services (-3,100 jobs). Once again, the biggest decline was in temporary help services (-48,900), where the number of workers has decreased in 26 out of the past 27 months. The sector has lost a total of 514,700 jobs since spring 2022. In the past, this drop might have been viewed as a warning sign for labour market problems in general, but the sector's decline has been so sharp—and so isolated—that we believe the problem is specific to this industry.

There is still a divergence between the establishment and household surveys. While the household survey results weren't negative this time, they do still continue to paint a gloomier picture of the job market. Unemployment rose for the fourth month in a row, boosted by a rapid increase in the labour force, and at 4.1%, June's results are the highest since November 2021. That said, the household survey is typically less reliable and more volatile, and its margin of error for monthly changes (±600,000 jobs) is much higher than the establishment survey's (±130,000 jobs). 

The US job market is still resilient, and the gain of 206,000 jobs in June is more proof that it's holding strong. The downward revisions for April and May change the situation a little, but monthly wage growth is still solid, confirming that upward pressure remains in place. This suggests that the Federal Reserve will probably stay on the sidelines until November.