Business Growth Eases Slightly but Still Steady, with 206,000 Hires in June

The American economy expanded again last month for the 41^st month in a row.

The country added 206,000 new employees to its payrolls last month, according to the Bureau of Labor Statistics. That’s lower than May’s 272,000 but still considerably more than April’s 172,000.

Unemployment moved up a notch from 4.0% the previous month to 4.1% this time. Even with that change, the total unemployed is relatively unchanged at 6 million. The only substantial shift in these figures is that the total number of long-term unemployed, those still seeking work after 27 weeks or more, reached 1.5 million this time. That is up by 166,000 from the previous month.

It is another continued sign that the balance in the economy, for now at least, is strong enough to keep the economy stable despite the Federal Reserve Board not adjusting bank lending rates downward and inflation hovering at 3.3% even without credit payment considerations.

Analysis by Industry Category

This time federal, state, and local government was the biggest hiring category in the country. It added 70,000 new hires, a value jumping far ahead of the average 49,000 added monthly since last June. The larger contributors to this came from public education with an increase of 34,000 and state government with 26,000.

Three states which led the nation in new hires last month were Virginia, with 46,000 adds, Arizona with 36,000, and Tennessee with 18,000. Among those which declined the most were California, which lost 81,000 state employees last month, followed by New York and Illinois, which dropped total headcount by 71,000 and 65,000, respectively.

The health care area was still high in the ranks for June hires, though down a bit from its mean of 64,000 for the previous twelve months. It brought in 49,000 new employees, with the subcategories of ambulatory health care services (+22,000) and hospitals (+22,000) providing the most gains.

Social assistance was third in overall job gains, with an increase of 34,000 people. That is up by more than 50,000 over the average growth rate for this category of 22,000. Individual and family services, which added 26,000 people, was the largest of this sector’s contributors for June.

Retail trade, a bellwether of the consumer purchasing area which drives 70% of the economy, saw jobs decline by 9,000 this time. The subcategory of other general merchandise retailers added 5,000 people, a value drawn down by a bigger drop of 6,000 positions in the furniture, home furnishings, electronics, and appliance retailer category.

The professional and business services part of the economy showed varying results for June, with a slight net fall of 17,000 from last month’s totals. Temporary help services fell by a substantial 49,000 last month, added to an overall net decline of 515,000 since its previous long-term high 23 months ago, in March 2022. The subcategory of professional, scientific, and technical services itself gained 24,000 new employees.

Most other job categories showed flat growth or relatively small gains or losses in total hires this time. This was the case for financial activities; information management; leisure and hospitality; mining, quarrying, and oil and gas extraction; other services; wholesale trade; and transportation and warehousing.  Some of these, such as leisure and hospitality, represent seasonal variations which will likely rebound again soon. Oil and gas extraction is down in part because of overall dips in demand despite the summer travel season; it may also see temporary shutdowns assuming Hurricane Beryl, which has shifted its path over the last few days, strikes the Texas coast on the Gulf of Mexico hard enough to require shutting down facilities for some time this month.

Average hourly earnings across the nation went up by 10 cents this time, for a new high of $35.00 and a 0.3% increase. That puts the annualized average growth in earnings up 3.9% for the last year.

Commentary

June’s 206,000 rise was in line with the average monthly employment gains of 220,000 for the past twelve months. Economists are not pointing to that as anything to be concerned about, with most celebrating another month of the most sustained economic growth period in the U.S. in this century.

Despite the short-term positive news, some darker clouds are forming on the horizon for American business.

As reflected by lack of growth in the retail trade area, consumers have already begun cutting back on most purchases. That is related to reduced long-term confidence in the economy, along with increased carrying costs for credit as interest rates stay high and borrowing continues to go up. Further, while according to available data manufacturing production is still increasing, surveys indicate people are shifting away from buying as much premium American goods than in the past over the last six months and are shifting to foreign suppliers such as from China, at lower price points for equivalent items. The housing market has also flatlined for now, with demand having fallen off dramatically since January.

Also as noted in the unemployment figures above, the number of long-term unemployed jumped substantially last month, by 166,000. That is only slightly lower than the total job growth in the country overall. As that increases, it will convert into increased expenses for unemployment benefits and reduced spending by individuals. If that occurs, there will be a ripple effect driving manufacturing employment down, along with supporting industries such as transportation and warehousing, and retail trade hiring. The leisure and hospitality industries would also suffer.

With far less consumer demand, prices will also soften. That should have some positive repercussions for the economy at large, with lower inflation as just one result. It also could ease that net inflation enough to encourage the Federal Reserve Board to finally issue one of its first rate cuts in years.

There are enough variable factors involved at this point that the best prediction going forward is that the American economy will continue slide throughout the rest of 2024 and hiring to decline with it.