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Economy in Brief

June Payrolls Beat Forecasts. Prior Months Revised Up
by Tom Moeller July 6, 2007

Nonfarm payrolls grew by 132,000 during June, an increase that slightly beat the Consensus forecast for a 125,000 rise. In addition, the prior two months' gains were upwardly revised by a collective 75,000.

The unemployment rate held steady last month at 4.5%. Household employment increased 197,000 (1.2%) following a 157,000 gain in May. The labor force jumped 310,000 (1.1% y/y), the largest gain this year. As a result, the labor force participation rate rose to 66.6%.

From the establishment survey, the job gain of 132,000 left the average gain in payrolls this year at 145,000 versus last year’s average of 189,000. Private service sector jobs rose just 95,000 (2.0% y/y), versus last year’s average gain of 154,000. Retail employment actually fell 24,200 (0.5% y/y) during June and the average this year has been a meager 7,000 per month after an outright decline of 2,000 per month during 2006. In the financial sector jobs grew just 1,000 (1.4% y/y) for an average 5,000 this year versus 16,000 last year. Professional & business services employment fell 9,000 and the average monthly gain this year has been 13,000, about a quarter of last year’s 42,000.

Factory sector payrolls fell again, by 18,000 (-1.3 y/y) but construction employment rose by 12,000 (-0.1% y/y). The average, though, during this year is a 1,000 per month decline versus an average 11,000 increase per month gain in 2006.

Government payrolls increased 40,000 (1.5% y/y) and in 2007 have risen an average 30,000, up from the per month average last year of 20,000.

Average hourly earnings increased 0.3% as factory sector earnings rose 0.2% (2.7% y/y and private service producing earnings rose a firm 0.4% (4.0% y/y). The monthly average increase in overall average hourly earnings this year has been 0.3% versus, down from 0.4% per month last year.

Inflation and Unemployment: A Layperson’s Guide to the Phillips Curve from the Federal Reserve Bank of Richmond is available here.

Employment June May Y/Y 2006 2005 2004
Payroll Employment 132,000 190,000 1.5% 1.9% 1.7% 1.1%
  Manufacturing -18,000 -7,000 -1.3% -0.2% -0.6% -1.3%
Average Weekly Hours 33.9 33.8 33.9 (June '06) 33.8 33.8 33.7
Average Hourly Earnings 0.3% 0.4% 3.9% 3.9% 2.8% 2.1%
Unemployment Rate 4.5% 4.5% 4.6% (June '06) 4.6% 5.1% 5.5%
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