Research
Fireworks Are Unlikely In the June Jobs Report
Daniel Zhao
Chief Economist at Glassdoor | Jul 2, 2019
On Friday, we’ll get the latest update on the U.S. job market from the federal government. After a disappointing May report, where employers added only 75,000 new jobs to payrolls, what’s coming next for jobs and pay?
Here’s what we’ll be watching for in the June jobs report:
In addition to the headline jobs added figure, growth in job openings has decelerated dramatically as well. According to Glassdoor's June Job Market Report, growth in job openings has nearly flatlined to an increase of just 1.4 percent year-over-year from a high of 16.1 percent in January 2018. While the level of open jobs on Glassdoor is still healthy at 5.65 million, the flattening growth indicates weakening employer confidence and foreshadows slowing job gains in 2019.
- 164,000 new jobs added to payrolls;
- Unemployment rate steady at 3.6 percent;
- Average hourly wages up 3.1 percent; and
- Labor force participation steady at 62.8 percent.
A Return to Trend in 2019?
The question on everyone's minds is whether May's report was an anomaly or a sign of things to come. While we don't expect June's report to be as weak, Glassdoor data suggests that there is a real slowdown. And one that’s here to stay. While the labor market grew at a healthy clip in 2018, strengthening headwinds and fading tailwinds are taking their toll. Escalating trade tensions are coinciding with the dissipating benefits of the Trump tax cuts and muting the labor market in 2019. Even without these factors, though, 2019 appears to be a return to the trend from the last few years of a decelerating recovery. In the chart below, we can see that the labor market recovery began in earnest in 2011 with more than 170,000 jobs added monthly on average. That accelerated until 2014 when the upward trend reversed and jobs added began to slow. While 2018 was above trend, 2019 appears to be a return to business as usual.
In addition to the headline jobs added figure, growth in job openings has decelerated dramatically as well. According to Glassdoor's June Job Market Report, growth in job openings has nearly flatlined to an increase of just 1.4 percent year-over-year from a high of 16.1 percent in January 2018. While the level of open jobs on Glassdoor is still healthy at 5.65 million, the flattening growth indicates weakening employer confidence and foreshadows slowing job gains in 2019.
Manufacturing Bowing Under Trade Headwinds
Following last week’s G20 summit, trade is top of mind for American businesses. Trade tensions with a laundry list of important trading partners like China, Mexico, Japan and India have injected uncertainty into business plans and even forced some companies to adjust supply chains. In particular, the manufacturing industry has been an area of concern. In June, the Fed's five regional manufacturing indexes all dropped, indicating softening conditions. On Glassdoor, we saw manufacturing job openings peak in August 2018 at 263,000 but then drop precipitously and consistently. In June, manufacturing job openings are down 13 percent year-over-year. This signals that weak jobs growth in manufacturing is likely to continue as employers hold off on increasing employment until uncertainty around trade has been resolved.
Friday’s Figure to Watch: Pay Growth
While the headline jobs added number was surprisingly weak, decelerating wage growth is much more concerning. Even with such a tight labor market, wage growth during this recovery has been sluggish. The acceleration in wage growth at the end of 2018 was seen as an encouraging sign that the tight labor market was translating into higher pay for workers, but the reversal of that trend in the last few months is disappointing news for workers hoping to reap the benefits of the tight labor market. In the chart below, we can see that growth in average hourly earnings, as reported by the Bureau of Labor Statistics, peaked at 3.4 percent in February 2019. Glassdoor data has shown a more dramatic but similar deceleration in the last few months.
Conclusion
In the upcoming June report, we're expecting a return to trend after a surprisingly weak May report. The economy may not be stalling, but it is slowing and we'll be watching for evidence of what the new normal is. The Fed and investors will also be keeping a keen eye on the report as anything but a return to trend will increase pressure on the Fed to cut rates at its next meeting, like many investors expect. Beyond the headline numbers, continued softness in manufacturing and wage growth will be the warning signs to look out for this month.Daniel Zhao
Daniel Zhao is Chief Economist at Glassdoor. On Glassdoor's Economic Research team, he has conducted research using Glassdoor's unique data on a variety of topics affecting job seekers and employers ranging from the health of the job market to pay transparency to employee engagement & retention. His work has been cited in publications like the New York Times, the Harvard Business Review and more. Prior to joining the Economic Research team, he also worked on improving the user experience for Glassdoor’s consumer jobs product and mobile app. He holds a bachelor's degree in applied mathematics and economics from Harvard College.
Tags:Labor Market
