What's Going On...With Jobs

The June employment report was hailed as strong, but digging a little deeper reveals a mixed labor market picture. Yes, payrolls were stronger than expected at 372k vs. the consensus expectation of 268k, along with the unemployment rate remaining at 3.6%. Here are the rubs, however: There were downward revisions to the past two months' payrolls, totaling 75k; the household survey (from which the unemployment rate is calculated) showed a drop in employment to the tune of -315k. The chart below shows both the payrolls (blue bars) and household (orange bars) surveys; and as shown, the household survey shows that employment has fallen in two of the past three months. The household survey tends to lead payrolls around economic inflection points.

Employment surveys diverge

June showed an increase of 372k in nonfarm payrolls while the household survey fell by 315k.

Source: Charles Schwab, Bloomberg, Bureau of Labor Statistics, as of 6/30/2022.

Dotted lines represent average for 1/31/2021-6/30/2022.

Relatively good news came via employment by sector, as shown below, with only government payrolls in the red last month; leisure & hospitality's reign at the top was taken out by education & health services along with professional & business services. The financial activities category was also notably weak, perhaps reflecting a more challenging interest rate and market environment.

Private > government payrolls

Education and health services led June’s job growth with 96k followed by professional and business services with 74k jobs while government was the weakest subtracting 9k jobs.

Source: Charles Schwab, Bureau of Labor Statistics, as of 6/30/2022.

Another rub is tied to the unemployment rate. As noted, it remained at a very low 3.6%, as shown in the first chart below. However, that was for the "wrong" reason as the labor force participation rate (LFPR) has rolled over—both overall and prime age measures—as shown in the second chart below.