The labor market may have cooled slightly in early summer, but not too much. Here are the five things we learned from U.S. economic data released during the week ending July 7.
Payroll growth remained solid in June. Nonfarm payrolls expanded by a seasonally adjusted 209,000. The Bureau of Labor Statistics also indicated that it lowered its previously reported estimates for April and May job creation by 110,000. Monthly job gains over the first six months of 2023 have averaged 278,000, a robust figure but well below 2022’s 399,000 mean. Private sector payrolls grew by 149,000, split between 120,000 in the service sector and 29,000 in the goods-producing sector. Job gains were spread across industries, with the sectors adding the most workers being health care/social assistance (+65,200) and the government (+60,000). The average weekly earnings of $1,155.15 was up 3.7 percent from a year earlier.
The separate household survey lowered the unemployment rate to 3.6 percent and the labor force expanded by 133,000. The labor force participation rate held steady at 62.6 percent, while the 25-54 participation rate edged up 1/10th of a point to 83.5 percent (its highest point in 21 years). The typical length of unemployment increased by 1/10th of a week to 8.7 weeks. The number of part-time workers seeking full-time work jumped by 452,000 to 4.191 million. The broadest measure of labor underutilization—the U-6 series—added 2/10ths of a point to a still-low 6.9 percent.
There were fewer unfilled jobs in May. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 9.824 million open jobs at the end of the month. Not only was this down by 496,000 from April and 14.1 percent from a year earlier, but it also represented the third time over the past four months the count was under 10 million. (Even at current levels, there remains a historically high number of unfilled jobs.) Professional/business services, health care/social assistance, and accommodation/food services have over a million open jobs. Hiring picked up, growing 107,000 from April to 6.208 million (-5.1 percent versus May 2022). 5.871 million left their jobs, up 211,000 from the previous month but off 2.6 percent from a year earlier. The number of people quitting their jobs rose by 250,000 to 4.015 million (-4.6 percent versus May 2022), while layoffs held steady at 1.555 million (+4.9 percent versus May 2022).
Purchasing managers report manufacturing slowed and the service sector accelerated in June. The Institute for Supply Management’s Manufacturing PMI shed 9/10ths of a point to a reading of 46.0. The PMI has been under 50—the threshold between an expanding and contracting manufacturing sector—for eight straight months. While the new orders index improved in June, measures for production, employment, and inventories all slumped. Only four of 18 manufacturing sectors reported growth, including printing and nonmetallic mineral products. The press release notes, “[d]emand remains weak, production is slowing due to lack of work, and suppliers have capacity.”
Meanwhile, the Services PMI jumped 3.6 points to 53.9. The ISM measure has been above 50.0 for six consecutive months. Surging were measures for business activity/production, new orders, and employment, while the inventories index pulled back. Fifteen of 18 service sector industries expanded during the month, led by accommodation/food services, arts/entertainment/recreation, and real estate. Survey respondents noted “an uptick in the rate of growth for the services sector” but also were “cautious relative to inflation and the future economic outlook.”
Airplanes boosted May factory orders. The Census Bureau indicates that new orders for manufactured goods increased for the fifth time in six months with a 0.3 percent gain to a seasonally adjusted $578.0 billion. Sharp increases in orders for civilian aircraft and ships/boats lead to a 3.8 percent advance for transportation goods. Net of transportation goods, core factory orders dropped 0.5 percent. Orders for durable grew 1.8 percent, while nondurables fell 1.2 percent. Shipments grew for the first time in four months, rising 0.8 percent to $572.6 billion. Unfilled orders swelled 0.7 percent to $1.302 trillion, while inventories contracted 0.2 percent to $853.8 billion.
The trade deficit shrank in May as exports and imports declined. Exports slowed 0.8 percent to a seasonally adjusted $247.1 billion and imports fell 2.3 percent to $316.1 billion. As a result, the Census Bureau and the Bureau of Economic Analysis trade deficit measure plummeted 7.3 percent to -$69.0 billion. The deficit over the first five months of 2023 (-$334.4 billion) was 22.8 percent below that of the same months in 2022. The goods deficit narrowed by $4.8 billion to -$91.3 billion, while the services surplus widened by $0.7 billion to +$22.3 billion. The former resulted from lower exports of soybeans and crude oil (and other energy goods), along with slowing imports of consumer goods (including pharmaceuticals and cell phones) and industrial supplies & materials. The U.S. had its largest goods deficits with China, the European Union, and Mexico.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending July 1, 2023, First-Time Claims, seasonally adjusted): 248,000, +12,000 vs. the previous week, +236,000 vs. the same week a year earlier). 4-week moving average: 253,250 (+18.1% vs. the same week a year earlier).
- Construction Spending (May 2023, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.926 trillion (+0.9% vs. April 2023, +2.4% vs. May 2022).
- Vehicle Sales (June 2023, Automobiles and Light Trucks, seasonally adjusted annualized rate): 15.679 million (+4.0% vs. May 2023; +20.2% vs. June 2022).
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What We Learned About the U.S. Economy Last Week 