Net Job Creation by Industry through June 2016

The statement of Erica L. Groshe Commissioner Bureau of Labor Statistics (BLS) released on Friday morning reads as though the increase in net non-farm employment of 287,000 in June was a fact as was the downwardly revised May number of 11,000. We at SMU don’t believe the May result has any credibility which is particularly troubling because the original result of a 38,000 gain was believed to have a major influence on the Feds decision not to raise rates in their June 14th and 15th meeting (see extracts from the Federal Open Market Committee (FOMC) minutes below.) The Fed didn’t raise its benchmark interest rate in June because officials worried about the “surprisingly weak May employment report”. The following are extracts from the minutes of the FOMC meeting held on June 14th and 15th.

“Total nonfarm payroll employment gains slowed in April and May, even after adjusting for the effects of a strike at a large telecommunications company. The unemployment rate dropped to 4.7 percent in May, partly reflecting an unusually large number of unemployed persons exiting the labor force. Over the first two months of the second quarter, both the labor force participation rate and the employment-to-population ratio moved down on net. The share of workers employed part time for economic reasons rose noticeably in May. Although the rate of private-sector job openings remained elevated, the rate of hires declined in both March and April and the rate of quits was unchanged. The four-week moving average of initial claims for unemployment insurance benefits moved up a little, on net, from late April to early June but was still at a low level. Labor productivity growth remained slow over the four quarters ending in the first quarter of 2016. “Effective June 16, 2016, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of ¼ to ½ percent, including overnight reverse repurchase operations at an offering rate of 0.25 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day.”