Economy Watch: Employment’s Upward Trajectory

June proved to be another reasonably good month for job creation by the U.S. economy. Here's why.

June proved to be another reasonably good month for job creation by the U.S. economy — anything over about 200,000 counts as good — though not stellar, since the total for the month, 223,000 according to the Bureau of Labor Statistics on Thursday, didn’t reach into the high 200,000s or even more than 300,000, where the total occasionally goes. Also, the previously two months’ totals were revised downward by 60,000 all together. Even so, June marks the third solid month in a row for jobs. It might even be the tipping point at which the Federal Reserve decides that it’s time for a small interest rate increase later this year, perhaps as soon as September. Or not. The ways of the Fed are nothing if not opaque.

The job gains for June were also pretty much across the board, and not concentrated in one sector of the economy, which is another good sign. Gains occurred in professional and business services, health care, retail trade, financial activities, and in transportation and warehousing, according to the BLS–a lot of categories that also happen to be good for the absorption of commercial real estate. In some markets, for instance Seattle or Denver, job growth has been strong enough lately to inspire not only office space adsorption but new development. If job growth remains strong in the coming months and quarters, that will probably start to happen in other markets as well.

Job growth has been particularly good in industries that use a lot of office space. Take job growth in the financial sector, for example. Employment in financial activities increased by 20,000 in June, with most of the increase among insurance companies (up 9,000) and in securities, commodity contracts, and investments (up 7,000). Commercial banking employment declined by 6,000, however. Still, jobs in financial activities have grown by 159,000 over the year, with insurance accounting for about half of the gain. Also, employment in professional and business services increased by 64,000 in June, about in line with the average monthly gain of 57,000 over the last 12 months. In June, employment continued to trend up in temporary help services (a gain of 20,000), in architectural and engineering services (up 4,000), and in computer systems design and related services (up 4,000), all industries that use office space. There’s only so much squeezing of employees into the same space that employers can do before they need to lease more space.

Also on Friday, the BLS reported — via a separate survey — that the nation’s unemployment rate dropped to 5.3 percent, the lowest that metric has been since April 2008. Even the BLS’ more comprehensive unemployment rate, U-6, which counts a lot more people among the jobless, came in a 10.5 percent, compared with 12.4 percent a year ago. Some of that drop is because workers are leaving the workforce (the leading wave of the Baby Boom, mostly), but also because of job creation. On the other hand, pay still isn’t rising that much. In June average hourly earnings for all employees on private payrolls was unchanged at $24.95. Since this time last year, average hourly earnings have risen by 2 percent. That’s roughly in line with inflation, which means that the main bar to full recovery for the U.S. economy may not be jobs any more, but worker earnings.