U.S. Nonfarm Payrolls Drop As Census-Hiring Ends; Private-Sector Hiring Again Modest

As the 2010 Census ended, 225,000 census jobs were lost. That accounted for most of last month's 125,000 decline in nonfarm payrolls. The 433,000 May increase was little revised but the 313,000 April gain was slightly stronger than initially estimated. Nevertheless, the details of the jobs report do not paint a picture of firming economic growth. First off, the overall June decline was larger than the 110,000 drop expected. Second, the 83,000 increase in private sector jobs was slightly less than expected and it followed a modest 33,000 May increase which was downwardly revised. These gains follow increases of 158,000 and 241,000 in March and April, respectively.

Average weekly hours worked slipped to 34.1 in June. Combined with slim gain in private sector payrolls, aggregate hours worked thus fell last month. However, earlier increases pulled aggregate hours worked for 2Q up at a 3.3% annual rate after the 2.2% gain during 1Q.

Despite these disappointments, the unemployment rate unexpectedly fell to 9.5% which was the lowest level since July. An increase to 9.8% had been expected. However, the decline occurred as 652,000 individuals (-0.7% y/y) left the labor force. That decline was double the amount that left in May though the number who left but want a job now is off from its December high. Household employment fell 301,000 (-0.7% y/y) after a 35,000 May decline. Therefore, the unemployment rate fell. Labor-market underutilization was further evident in the 16.5% of workers who were either "marginally" attached or involuntarily employed part-time. Even further slack was evident in the average duration of unemployment which rose to a postwar record 35.2 weeks; 45.5% had been unemployed for 27 weeks or more.

The payroll employment details indicate broad-based weakness in hiring. Factory sector jobs rose by just 9,000 which was the weakest gain this year; held back by declines in electrical equipment (-1.4% y/y) and motor vehicle (+8.8% y/y) jobs. The number of construction jobs fell 22,000 for the fourth decline this year. Amongst private service industries, hiring rose 91,000 but that left the y/y gain anemic at 0.2%. Retail trade jobs fell 6,600 (-0.8% y/y) as did financial activity jobs by 15,000 (-2.0% y/y). Offsetting these losses were higher professional & business service jobs (1.6% y/y), higher health care sector employment (1.9% y/y) and more leisure sector jobs (0.1% y/y). In the government sector, the census lifted federal government hiring. Budget deficits, however, offset this rise and state government jobs fell 2,000 which was the sixth decline in the last eight months (-0.3 y/y). Hiring by municipalities also fell 8,000 which was the sixth decline in the last seven months (-1.2% y/y).

Weakness in hiring left average hourly earnings unchanged last month. A 0.1% uptick had been expected. That pulled the y/y change to 2.3% which was the second weakest gain since 2004. In goods-producing industries, the 12-month rise of 1.9% was accompanied by a 2.5% increase in private service sector earnings.

The figures referenced above are available in Haver's USECON database. Additional detail can be found in the LABOR and in the EMPL databases.

Fiscal Crises of the States: Causes and Consequencesfrom the Federal Reserve Bank of San Francisco can be found here.

Employment: 000s	June	May	April	Y/Y	2009	2008	2007
Payroll Employment	-125	433	313	-0.1%	-4.3%	-0.6%	1.1%
Previous	--	431	290	--	--	--	--
Manufacturing	9	32	38	-1.0%	-11.3%	-3.4%	-2.0%
Construction	-22	-30	22	-7.4%	-15.7%	-6.1%	-0.8%
Private Service Producing	91	20	174	0.2%	-3.4%	-0.2%	1.7%
Government	-208	400	72	0.9%	0.2%	1.3%	1.1%
Average Weekly Hours	34.1	34.2	34.1	33.8 (June '09)	33.1	33.6	33.8
Average Hourly Earnings	0.0%	0.3%	0.3%	2.3%	3.0%	3.8%	4.0%
Unemployment Rate	9.5	9.7%	9.9%	9.5%(June '09)	9.3%	5.8%	4.6%