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Payrolls Up 195K, Unemployment Rate Flat in June

Adding new pressures for the Federal Reserve, the nation's economy added 195,000 jobs in June, leaving the unemployment rate unchanged at 7.6.percent, the ""Bureau of Labor Statistics"":http://www.bls.gov/news.release/archives/empsit_07052013.pdf (BLS) reported Friday. Economists had forecast payrolls would grow by 165,000 and that the unemployment rate would dip to 7.5 percent.

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Payroll growth for May, originally reported at 175,000, was revised to 195,000. March payroll growth was revised to 199,000 from 175,000.

Average weekly hours remained at 34.5, but average hourly earnings jumped five cents.

While the unemployment rate was unchanged, the broader employment-population ratio improved to 58.7 percent.

The Fed has been looking to improvements in the labor market for a sign it should begin to reduce its program of stimulative monetary policy.

The increase in jobs (determined from a survey of employers) came largely in the leisure and hospitality and retail segments, the two lowest-paying industry sectors, which accounted for 112,100 or 57.5 percent of the new jobs. According to the report, the number of multiple job holders increased in June by 147,000, meaning about three of every four new jobs went to individuals who were already working.

Unemployment edged up 17,000 in June, the second straight monthly increase, while the number of persons employed, derived from a survey of households, rose 160,000. The total labor force rose 177,000.

For the second quarter, the number of payroll jobs increased 589,000, down from 622,000 in the first quarter, when the nation├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós economy grew at 1.8 percent--far below the 3.0 percent growth rate considered necessary to make a significant dent in the unemployment rate.

The jobs report took on added significance as traders and investors looked for a signal that the Federal Reserve would cut back on its purchase of mortgage-backed and Treasury securities in its program to expand the nation├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós money supply in an effort to revive a still-lagging economy. The Fed has been purchasing $85 billion of the securities each month but indicated it would taper that program as employment improved and inflation remained under control.

The Fed set a target of a 6.5 percent unemployment rate to reverse its easing of monetary policy.

While the employment report at first glance appeared positive (the month-over-month increase in jobs was ahead of the average increase in the last year), the concentration of the new jobs in lower-paying sectors was cause for concern.

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The average weekly earnings of leisure and hospitality workers in June, according to BLS, was $351.31 and of retail workers $522.50. The average weekly earnings of all private sector workers, the BLS reported, was $828.35 in June.

The number of government workers dropped a net 7,000 in June; the number of local government jobs grew 13,000, but the number of state government jobs dropped 15,000, and the number of federal jobs was down 5,000.

The number of temporary jobs grew 9,500 in June. Temporary jobs are often considered a gateway to permanent employment but also signal a lack of confidence by employers that economic conditions can support adding full-time workers. Indeed, the number of part-time workers increased 60,000 in June, while full-time workers fell 240,000.

By industry, the number of professional and business service jobs grew 53,000 (including temporary jobs), construction jobs rose 13,000, and financial sector jobs increased 17,000, including 6,200 underwriting positions. The education and health care sector added 13,000 jobs, far below the three-month average of 36,000 new jobs per month in that sector. At the same time, the number of manufacturing jobs fell 6,000 in June, the fourth consecutive monthly decline.

Despite the increase in jobs, the number of ├â┬ó├óÔÇÜ┬¼├àÔÇ£discouraged├â┬ó├óÔÇÜ┬¼├é┬Ø workers was 1,027,000 in June, up 206,000 from a year earlier. The number of re-entrants to the labor force--individuals previously unemployed who resumed a job search--fell 42,000 in June to 3,291,000.

While the employment-population ratio that measures the percentage of the over-16 population employed ticked up to 58.7 percent in June from 58.6, it remained far below its peak of 64.7 percent in April 2000. When the recession began in December 2007, the employment-population ratio was 62.7 percent.

The improvement in the number of leisure and hospitality and retail jobs suggests an improved outlook for those industries in the coming months and, even with seasonal adjustments, reflects a summer vacation and shopping impact. The number of hotel and restaurant jobs grew 51,700, more than two-thirds of the increase in leisure and hospitality jobs.

Within the unemployment statistics, the report showed the number of job ├â┬ó├óÔÇÜ┬¼├àÔÇ£losers├â┬ó├óÔÇÜ┬¼├é┬Ø dropped 28,000 in June to 6,119,000, the lowest level since October 2008, suggesting businesses have stopped large-scale layoffs--as the trend in initial unemployment claims indicates. The number of ├â┬ó├óÔÇÜ┬¼├àÔÇ£new entrants├â┬ó├óÔÇÜ┬¼├é┬Ø to the unemployment rolls fell 9,000 in June--a college graduation month--suggesting recent graduates were able to find work or have opted to continue their education.

The number of persons unemployed for 27 weeks or more--long-term unemployed--dropped 29,000 to 4,328,000.

The labor force participation rate rose to 63.5 percent, still low by historical standards. It had been 66.0 percent before the recession began in December 2007. The current rate is the lowest since December 1978, in part reflecting an increase in school enrollment, which could affect the ├â┬ó├óÔÇÜ┬¼├àÔÇ£available-for-work├â┬ó├óÔÇÜ┬¼├é┬Ø test.

_Hear Mark Lieberman on P.O.T.U.S. Radio, Sirius-XM 124, Monday at 12:20 p.m. Eastern._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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