June 2017 Jobs Report

Industry News

Market Reporting that Matters

July 2017 Jobs Report

Job Gains Continue Surge in July

Tuesday, August 8, 2017

The U.S. economy added 209,000 jobs in July, according to the U.S. Bureau of Labor Statistics (BLS), more than many economists predicted and the fourth-highest monthly gain this year behind January (216,000), February (232,000) and June (231,000). The unemployment rate ticked down slightly to 4.3%, thanks to a 349,000 increase in the civilian labor force.

 

 

IN THIS ISSUE

Twin Cities, DC Move Into Top 10

Fed Getting Mixed Economic Signals

By the Numbers

Revisions to the previous two months’ numbers added a net total of 2,000 jobs to the estimates. May’s job-gain figure of 152,000 was revised downward to 145,000, while June’s was revised up from 222,000 to 231,000. July's monthly number was 29,000 jobs greater than the 12-month average (180,000) and close to the average from August 2015-July 2016, surpassing the average during that period by 4,000.

Annual job growth clocked in at 1.5%, only 10 basis points (bps) less than June 2016. Annual job gains were 2.158 million, 303,000 less than July 2016’s total and 82,000 less than June’s annual rate.

Average hourly earnings (wages) for privately employed workers continued to rise, with July’s average of $26.36 representing a 2.5% increase from a year ago, though that was slightly below the 12-month average of 2.6%. July’s average does, however, match the average from August 2015-July 2016. Annual wage growth continued to remain stubbornly below 3.0% since April 2009.


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June’s U3, or “headline,” unemployment rate of 4.3% was down from 4.4% in June. The civilian labor force participation rate rose another 10 bps to 62.9%, and was up the same amount from last year. The employment-population ratio of 60.12 also ticked up 10 bps from the previous month and was 40 bps higher than July 2016.

The number of part-time workers for economic reasons (5.28 million in July) decreased by 44,000 from June, but was down by 654,000 from July 2016. The U6 unemployment rate, which includes these part-timers and marginally attached workers, remained at 8.6% from June to July.

In addition, the number of long-term unemployed (27 weeks or more), seasonally adjusted, rose by 121,000 from June to 1.785 million. The average duration of unemployment fell by roughly three weeks from July 2016 to 24.9 weeks, but rose by about a day from the previous month. The number of multiple jobholders increased by 113,000 from July 2016 to 7.3 million, but the number of discouraged workers not in the workforce (536,000) decreased by 55,000 from one year ago.

Industry Focus

The not seasonally adjusted unemployment rate for the oil and gas extraction was 4.5% in July, considerably lower than the 9.3% of one year earlier. The information sector has steadily improved, with a 140-bps difference between July 2016’s 5.7% unemployment and July 2017’s 4.3%. Only Construction (-40 bps) and Other Services (-60 bps) recorded higher unemployment rates in July 2017 than the previous year.


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The most significant job gains for July occurred in the Leisure and Hospitality (+62,000), Education and Health Services (+54,000), Professional and Business Services (+49,000) and Manufacturing (+16,000) sectors. No individual employment sector recorded a loss of jobs. 


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  • Construction added 6,000 jobs. The residential building subsector had the largest share of that gain with 5,100 jobs added. 
  • The Mining and Logging supersector recorded no change in jobs between June and July, remaining at 712,000 total jobs. Gains in the mining subsector (+1,200) offset losses in logging (-900). 
  • After a tepid 1,000 jobs gained from May to June, Manufacturing saw a steep increase to 16,000 jobs added. Establishments in the durable goods sector added 13,000 and nondurable goods added the remaining 3,000. 
  • Trade, Transportation, and Utilities increased by 7,000 total jobs. Wholesale trade added 6,100, while retail trade and transportation and warehousing added 900 jobs each. The retail trade subsector was hard hit by the 10,000-job loss among clothing and accessory stores, but made up that loss with gains in building materials and garden supply stores (+5,000) and general merchandise stores (+4,600). 
  • Information’s 4,000 added jobs from June to July is up from the job losses the previous month. The other information services (+2,300) and the motion picture and sound recording industries (+2,100) subsectors led the gains, while broadcasting, except Internet, lost 1,000 jobs.

  • The 49,000 Professional and Business Services jobs added was 17,000 more than the gains of the previous month.  Administrative and Waste Services added 30,000 of those positions, while Professional and Technical Services added 17,900, some 7,000 of those in the management and technical.
  • Leisure and Hospitality led the nation with 62,000 jobs added. The accommodation and food services subsector added 53,400 of them, all but 300 in the food services and drinking places fields.

Twin Cities, DC Move Into Top 10

Eight of last month’s top 10 job-gain metros remained the same in June (the latest metro figures available), but solid gains in two new metros pushed Orlando and Tampa out of the top 10.

New York, Atlanta, Dallas and Los Angeles remained the top four job-gainers among Axiometrics’ 120 ranked metros, as they were last month, but Atlanta gained the No. 2 spot, moving Dallas down to No. 3. Minneapolis-St. Paul vaulted to No. 5 from No. 12 last month, knocking Orlando down to No. 11. Boston, Phoenix and Houston remained in the Nos. 6-8 spots, while Riverside improved one spot to No. 9 and Washington, DC returned to the No. 10 slot from No. 14. Tampa dropped from No. 9 to No. 12.

Together, the total jobs created in the top 10 metros for the 12 months ending in June were up 18.6% from May’s annual total (748,000 vs. 630,700), and up 22.1% from the 12-month total for June 2016 (748,000 vs. 612,500).

Meanwhile, Miami fell from No. 20 to No. 27, Austin slipped from No. 18 to No. 24, Nashville dropped from No. 13 to No. 18 and Charlotte dipped from No. 15 to No. 19. Upward movers included Anaheim, which rebounded from No. 84 to No. 39; Baltimore, which moved to No. 46 from No. 58; Cincinnati, which jumped from No. 30 to No. 20; and Chicago, which moved from No. 24 to No. 14.

Annual job growth slowed in five of the top 10 markets in June:

  • Los Angeles (-52 bps)
  • Washington, DC (-27 bps)
  • Riverside (-6 bps)
  • Phoenix (-6 bps)
  • Dallas (-1 bps)

Job growth was up in:

  • New York (+20 bps)
  • Atlanta (+37 bps)
  • Boston (+90 bps)
  • Houston (+198 bps)
  • Minneapolis (+223 bps)

The energy markets of Tulsa and New Orleans jumped out of the bottom five from last month with positive job gains, allowing Mobile, Virginia Beach and Newark to return to the list. The annual job losses in June’s bottom five metros lessened compared to May, as the number of top 120 metros reporting losses halved from 10 to five. Knoxville, TN and Greenville, NC joined this month’s bottom five with weakness in the Mining & Logging and Manufacturing industries curtailing economic growth in these markets.

 
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Access the current job-growth spreadsheet here.

Please contact us if you have any questions. Info@axiometrics.com

Fed Getting Mixed Economic Signals

Like a co-dependent relationship, the economy is sending mixed signals to Federal Reserve officials grappling with a looming decision on future interest rate hikes. The Fed has already raised interest rates twice this year, with many analysts predicting one more in 2017.

These signals include:

  • A muted overall inflation rate seemingly allergic to the Fed’s target.
  • An unrestrained housing inflation rate that has finally begun to dip in the face of growing apartment inventories.
  • Employment and wage growth gains concentrated among the lowest earners.

Unemployment, at 4.3% in July, is now well below the natural rate of 5.0%, but inflation is remarkably restrained. Historically, as unemployment falls, wage pressure builds as labor becomes scarcer, and inflation rises. However, since the Great Recession ended, inflation surpassed the Fed’s target only in early 2012. Both indicators fell by about half a percentage point between January and May. We are using the Fed’s primary measure of inflation, the personal consumption expenditures price index.


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Housing inflation, on the other hand, has not shown such restraint with housing costs growing, on average, by more than 3% per month (annualized) since the start of 2017. If we removed housing inflation from the equation, the overall inflation rate would be even lower than it is today.  

Comparing the inflation rate (this time using the more traditional consumer price index) against housing inflation alone, it’s clear that after a year of compression between the two rates, housing inflation soared in early 016 and has only recently begun to tick downward. This moderation in housing inflation partially reflects the downward pressure on rent growth, which has itself moderated in the face of growing new supply levels and the sheer number of properties in lease-up in major markets.


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If the inflation rate is underperforming the Fed’s expectations, the same cannot be said for the unemployment rate. As expected, falling unemployment is boosting wages, but the primary beneficiaries of wage growth are, as of late, low-income earners. Whereas the unemployment rate for all workers fell by half a percentage point since last year, it fell by over one percentage point for workers without a high school diploma.


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And, starting in the second quarter of 2016, the lowest decile income earners have seen the fastest wage growth. The top decile earners, on the other hand, are seeing wage growth below that of median earners.


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In fact, we can attribute the strength of low-income earners’ wage growth in recent quarters to the broader economic recovery, which has led to more spending, particularly on services, which has increased demand for lower-educated workers in these industries, thereby boosting their own spending power.

For the apartment market, an interest rate hike would likely lead to higher borrowing costs, but with little impact on cap rates as outlined on our Forbes blog. If anything, a rate hike would suggest confidence in the broader economy, which is partially reflected in the pace of job gains (a key indicator of demand for apartments).

By the Numbers

The following table shows June 2017 (the latest data available) metropolitan-area job gain and job growth, some grouped by state or region.

 
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