– July 8, 2016

The Employment Situation Report released by the Bureau of Labor Statistics this morning shows improvement in the labor market compared to the gloomy report last month. According to the latest data, in June the U.S. economy added 287,000 jobs, but the May numbers were revised down to only 11,000 jobs from the 38,000 reported a month ago.

This brings the average growth so far in 2016 to 172,000 jobs per month. Despite the improvement in June, the average is still below the annual averages seen in the past two years. (See chart).

Almost all job growth came from private service-providing industries, which added 256,000 jobs. Within the service industries, the largest increases came in leisure and hospitality (59,000 jobs added), health care and social assistance (58,400 jobs), and information (44,000 jobs, but most of this reflects the return of workers from a strike). Goods-producing industries added only 9,000 jobs and government added 22,000.

At the same time, the unemployment rate increased in June to 4.9 percent, from 4.7 in May. This, however, is not a bad sign, because the increase in the unemployment rate came primarily from more people entering the labor force. The civilian labor force grew by 414,000 in June, and the labor force participation rate rose to 62.7 percent from 62.6 percent. For both measures, this is the first increase since March of this year.

Most of the people who entered the labor force, however, remained unemployed in June; employment rose by only 67,000. Still, people flooding back into the labor force is usually a sign that they see improved prospects of finding jobs. The fact that, in June, many people apparently judged their job prospects as improved is a positive development for the economy overall.

Improved jobs numbers in June suggest that May’s dismal report may have been a one-time anomaly. Time will tell. For now, it appears that the labor market remains a point of relative strength in the economy.

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Polina Vlasenko, PhD

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