June Employment Robust—For How Long?

The Mortgage Corner

More workers are being hired in manufacturing and professional services in June’s unemployment report. But this is before the trade war now taking hold with at least 5 allies and trading partners.

Washington’s 25 percent duties on Chinese imports went into effect at midnight EDT and affected products such as water boilers, X-ray machine components, airplane tires and various other industrial parts. China immediately retaliated with tariffs on its $34 billion list of goods issued last month, including soybeans, pork and electric vehicles.

We know that manufacturing will also be hurt by the tariffs on imported steel and aluminum that go into the finished products the US exports, so the 36,000 hires in manufacturing may be a temporary blip as manufacturers attempt to get ahead of already occurring price rises.

Even more hurt will be put on Midwestern farmers, as China, the EU, Canada, and maybe even Mexico will be targeting their produce with higher tariffs in response to Trump’s levies.

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Graph: MarketWatch

A sharp rise in the number of unemployed actively looking for a job, to 6.564 million from 6.065 million in May, lifted the unemployment rate 2 tenths to 4.0 percent from 3.8 percent in May, and also lifted the participation rate 2 tenths to 62.9 percent.

It’s because for the first time in nearly 20 years of existing records, already in April the number of job openings at 6.698 million in the Labor Department’s JOLTS report exceeded the number of unemployed actively looking for work, at 6.346 million. It suggests employers are having a hard time finding people to fill the jobs. That is the understatement of the year.

The gap between openings and hires in the JOLTS report was 1.120 million, the second largest on record next only to March’s 1.147 million. It also gives a picture of why employers are having finally to raise their workers’ pay.

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Graph: Calculated Risk

The Bureau of Labor Statistics reported “The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in June at 4.7 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.”

But add the 1.5 million that want to work but haven’t worked in the past 26 weeks, and we still have a decent labor pool to draw from. It all adds up to 7.8 percent that are the “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force,” per the BLS.

So is the June jobs report just an attempt to get ahead of the inevitable jump in prices and job losses that a trade war causes? Such a war has to seriously hurt all business, not just US businesses.

Harlan Green © 2018

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

About populareconomicsblog

Harlan Green is editor/publisher of PopularEconomics.com, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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