Insights and Perspective

 

Insights and Perspective

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by Philip Sprehe

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for June 2021 on Friday, July 2nd. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 16 months since the Covid-19 economic lockdown and are a welcome sign that employment has moved past the disappointing pattern which was feared to be emerging in April and May.

Employment in the U.S. rose by 850,000 jobs, only 2% below the Geographic Solutions, Inc. forecast of 867,000. The WSJ Economist Survey forecast at 706 thousand jobs underestimated jobs by more than 20%. The Geographic Solutions forecast was derived from internal data on the number of job openings, job severances, job searchers, job applications, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast used unemployment claims data from the U.S. Department of Labor (USDOL). 

The unemployment rate slightly increased to 5.9%, above the Geographic Solutions forecast of 5.5% and the WSJ forecast of 5.6%. The unemployment rate forecast used internal data on job openings, job applications, job searchers, job severances, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast used unemployment claims data from the USDOL.

Job creation was most pronounced in Leisure & Hospitality (+343,000), the largest driver of new employment for several months even as restaurants and hotels struggle to fill job openings. Job market gains also came from a strong performance in Government that totaled 188,000 new jobs. However, Local Government Education (+155,000) strongly suggests that the overall measured increase was mostly due to seasonal adjustments anticipating a “summer recess” effect based on pre-pandemic years. 

As stated above, Leisure & Hospitality employment continues its climb, but it has a long way to go before completing its recovery. Its employment remains 13% below February 2020. No other major industry has employment more than 6.5% below its February 2020 total.

The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one. The U-3 unemployment rate ticked up to 5.9% from the previous month. 

The labor force participation rate remained unchanged at 61.6% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.4% to 9.8%. When the gap closes between the U-3 and U-6 unemployment rates, it is usually a sign that more people are actively searching for work and possibly abandoning part-time work in order to do so. 
 

The June labor market report will come as a relief to many after earlier lackluster growth. Yet, the U.S. employment level remains 6.7 million jobs below its February 2020 total. The job market would have to generate 1.1 million jobs on average per month to complete the recovery by the end of the year when most surveyed economists are predicting an average of 500,000 for the year. The three crucial factors to watch going forward are lingering fears about the pandemic, parents attending to children not in school or daycare, and state government changes to extended unemployment benefits.



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