July 2018 US Jobs Report

Event- On a seasonally adjusted basis, total nonfarm employment rose by 213,000 in June, according to the US Bureau of Labor Statistics (BLS) in its monthly jobs report. Temporary help services employment rose by 0.3% in June, adding 9,300 jobs, and the temporary penetration rate remained at 2.04%. The national unemployment rate ticked back up to 4.0%.

Background and Analysis- On a year-over-year (y/y) basis (June 2018 over June 2017), total nonfarm employment was up 1.6%, and monthly job gains have averaged approximately 198,000 over the past 12 months. Temporary help employment was up 3.2% y/y, with monthly job gains averaging approximately 7,900 over the past 12 months.

The economic sectors that most drove total nonfarm employment growth in June (on a seasonally adjusted basis) include professional services excluding temporary help (+40,700), manufacturing (+36,000) and healthcare and social assistance (+34,700). Retail trade was the only decliner (-21,600) and there was no change in the Information sector.

BLS Revisions- The change in total nonfarm payroll employment for May was revised from +223,000 to +244,000 and the change for April was revised from +159,000 to +175,000. With these revisions, total nonfarm employment gains during the two-month period were 37,000 greater than previously reported.

The change in temporary help services employment for May was revised from -7,800 to -4,700 and the change for April was revised from +9,200 to +17,800. With these revisions, temporary help employment growth was higher than previously reported by 11,700 jobs.

Staffing Industry Analysts’ Perspective- This month’s jobs report was favorable, reflecting the improving economic backdrop and outlook. (The Conference Board’s latest projections of US GDP growth for Q3 and Q4 of this year are 3.5%, citing greater consumer and business confidence). Though this month makes the current economic expansion nine years old, it has been an expansion ranging from 1% GDP growth at times to the current 3%+ growth. While temporary staffing typically stalls out in the latter stages of an economic expansion, it also responds to substantial fluctuations within an expansion, adding 9,300 jobs last month for example. Though data can be choppy on a monthly basis, we would not be surprised to see temporary staffing continue to benefit from the favorable changes in the economy in the short-term as businesses adjust to greater demand, after which we expect the industry to cool to a slower pace more typical of the mature phase in an economic cycle.

Though the unemployment rate ticked back up to 4.0% in June (from 3.8% in May), it was entirely driven by a welcome surge in the labor force of 601,000 people. As there currently are not many unemployed people left in the labor force, drawing people back into the labor force will be important for continued job growth. (The US labor participation rate last month for those 25-54 years old was 82.0%, up from below 81% in 2015, but below pre-recession levels of 83%.) The only news in this jobs report close to disappointing was that that y/y growth in hourly wages was unchanged from last month at 2.7%; we anticipate a small rise in response to inflation and a stronger economic backdrop.

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