U.S.: Non-Farm Payrolls Fall in June, Unemployment Rate Remains at 5.5%

• U.S. nonfarm payrolls were down 62K in June, which was in line with expectations. The net revisions were -52K.
• The unemployment rate remained at 5.5% in June, after a sizable jump in May. This suggests that indeed the labour market is weak.
• There was a fairly broad based decline in employment and the trends were largely unchanged from previous months. There was no discernable impact on employment from the Midwest floods.

Nonfarm payrolls fell by 62K in June, which was in line with expectations. This is consistent with the size of losses we have seen over the past couple of months. The unemployment rate, however, was telling. It remained at 5.5% in June, following a large jump between April and May. This suggests that there is indeed, a lot of underlying weakness in the labour market. The three month average decline in nonfarm payrolls was -64K, while the six-month average was -73K. Hours worked also continued to decline and on a year ago basis, it is down 0.6%.

The backdrop for the labour market remains weak, even as the June reading was in line with expectations. There have been downward revisions to the initial estimate of payrolls in the last eight of nine months. Private sector job declines amounted to 91K in June, for the third consecutive month. Moreover, the decline in jobs remains broad based, with nearly every major category posting losses, with only a few exceptions, though the Midwest floods did not figure into the story. Big losses continue to be recorded in construction (-43K), and manufacturing (-33K), but professional and business services were down 51K and financial activities were also down 10K. About the only categories that posted gains were education, health, leisure and hospitality and government. And in the case of leisure and hospitality, that is a weak U.S. dollar story, while the others are generally acyclical.

The fact that businesses are scaling back hours worked is also telling. It suggests that they are doing what they can to avoid laying off. But there has already been a loss of 438K jobs since the beginning of January and this is now the sixth consecutive month of declines in payrolls. With most labour market indicators pointing to weakness in the job market, there is scope for further declines in payrolls.

TD Bank Financial Group

The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.