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In the past few months, my focus has been on whether jobs gains are most consistent with a “soft landing,” i.e., no further deterioration, or whether deceleration is ongoing. In the last several months I have also pointed out that the Household Survey is probably understating growth because of its large undercount of recent immigrants joining the labor force.

This month the summary is easy: the Establishment report was weak (but still positive); the Household report was recessionary.

Below is my in depth synopsis.

HEADLINES:

• 114,000 jobs added. Private sector jobs increased 97,000. Government jobs increased by 17,000. 
• May was revised downward by -2,000, and June was revised downward by -27,000, for a net decline of -29,000. This continues the pattern from nearly every month in the past 18 months of a steady drumbeat of downward net revisions.
• The alternate, and more volatile measure in the household report, showed an increase of 67,000 jobs. On a YoY basis, in this series only 57,000 jobs, which round to 0.0%, or no gain at all.  With the sole exception of 1952 and one month in 1957, this has always and only occurred shortly before or during recessions.
• The U3 unemployment rate rose 0.2% to 4.3%, triggering the “Sahm rule” recession indicator.
• The U6 underemployment rate rose 0.5% to 8.2%, 1.4% above its low of December 2022.
• Further out on the spectrum, those who are not in the labor force but want a job now rose 362,000 to 5.600 million, vs. its post-pandemic low of 4.925 million in early 2023.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. Outside of construction, all of the rest were flat or negative.

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.2 hours to 39.9 hours, and is down -0.6 hours from its February 2022 peak of 41.5 hours.

• Manufacturing jobs rose 1,000.
• Within that sector, motor vehicle manufacturing jobs declined -1,300. 
• Truck driving declilned -2,400.
• Construction jobs increased 25,000.
• Residential construction jobs, which are even more leading, rose by 1,700 to another new post-pandemic high.
• Goods producing jobs as a whole rose 25,000 to another new expansion high. These should decline before any recession occurs.

• Temporary jobs, which have generally been declining late 2022, fell by another -8,700, and are down about -500,000 since their peak in March 2022. This appears to be not just cyclical, but a secular change in trend.
• the number of people unemployed for 5 weeks or fewer rose 223,000 to 2,351,000.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.09, or +0.3%, to $30.14, for a YoY gain of +3.8%. This continues the decelerating trend in YoY growth in wages since their post pandemic peak of 7.0% in March 2022. Keep in mind that this is still significantly higher than the 3.0% YoY inflation rate as of last month.

Aggregate hours and wages: 

• the index of aggregate hours worked for non-managerial workers declined -0.2%, and is up 1.2% YoY, basically in trend for the past 12+ months.

•  the index of aggregate payrolls for non-managerial workers was unchanged, and is up 5.1% YoY. These have been slowly decelerating since the end of the pandemic lockdowns. But with the latest YoY consumer inflation reading of 3.0%, this remains powerful evidence that average working families have continued to see gains in “real” spending money.

Other significant data:

• Professional and business employment declined -11,000. These tend to be well-paying jobs. This series had generally been declining since May 2023, but earlier this year had resumed increasing again. As of this month, they are only higher YoY by 0.6% - a very low increase that has *only* happened in the past 80+ years immediately before, during, or after recessions.
• The employment population ratio declined -0.1% to 60.0%, vs. 61.1% in February 2020.
• The Labor Force Participation Rate increased +0.1% to 62.7%, vs. 63.4% in February 2020. The prime 25-54 age  participation rate rose sharply to 84.0%, the highest rate during the entire history of this series except for the late 1990s tech boom.

SUMMARY

This month was the smallest gain in employment since the pandemic except for this past April. The unemployment rate was the highest since October 2021. Once again, however, there was some divergence between the two surveys, with the Household survey being decisively weaker.

I nevertheless still recommend taking the recession cries that you will read elsewhere in the next few days with lots of grains of salt. I note in particular the very large increase in the prime age labor force participation rate - which itself is probably an underestimate, due to the impact of the post-pandemic immigration surge, which has not been incorporated into the underlying labor force participation level, which has been flat. As indicated above, the YoY stall in the Household number is also recessionary. Within the Establishment survey, the stall in professional and business jobs was also recessionary.

But the main Establishment report, while undeniably weak, was still positive, with significant gains in construction, a small gain in manufacturing, and an aggregate decent gain in goods production. Additionally, aggregate nonsupervisory payrolls are likely still growing in real terms, which means most households have more money to spend in real terms. While some of the leading aspects of this survey data (like manufacturing hours) were negative, I don’t think we have any serious pre-recession signal unless and until goods-producing jobs rollover.

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