Media headlines following the Bureau of Labor Statistics June jobs report, released July 2, were generally less than enthusiastic:
These sentiments generally skew to the negative and diverge, to an extent, from ITR Economics’ own analysis.
There are positive points about the latest employment-related data. This is our analysis:
Both the May-to-June rise and the first-quarter-to-second-quarter rise in US Private Sector Employment were normal relative to recent years.
ITR Checking Points™, an analysis of the relationship between the quarterly growth rate and the annual growth rate, suggest that Phase B, Accelerating Growth, is imminent for US Private Sector Employment.
Quarterly US Total Private Job Openings were above year-ago levels in both April and May (latest available data), a meaningful milestone given they were previously in long-term negative trends, below year-ago levels since September 2022.
There are also some negative points:
Labor force participation continues to decline. Following a sharp, COVID-induced decline that lasted into early 2021, the US Civilian Labor Force Participation Rate (annual average) rose into mid-2024, but it peaked below the pre-COVID level and has declined since.
US Real Wages and Salaries, one measure of consumer purchasing power relative to inflation, are weakening; in May (latest available data), the quarterly average came in below year-ago levels for the first time since a brief period in late 2022 and early 2023.
From a consumer standpoint, the overall message of the above insights is nuanced. Of the headlines noted at the beginning of this blog, the “yellow card” analogy may be the most apt. Employment is generally available, giving the consumer the means to drive the economy. However, declining Real Wages and Salaries mean that consumers are facing headwinds and — in the middle- and lower-income tiers, particularly — likely pulling back on discretionary spending.
This dichotomy is parallel to the dynamic we discussed last month, with consumers saving less of their income but retaining the ability to take on debt to fuel spending and therefore the economy.
Be aware that consumers are, as a bloc, able to spend, but lower- and middle-income tiers will, broadly speaking, not make discretionary purchases unless there is a clear value that outshines alternatives. Because margins are a major concern, over-conceding on price is not the answer. Be sure your customers know why your products or services are simply the logical choice.
We will be watching the delicate balances of job availability vs wages/salaries and savings vs credit viability to be sure that the yellow card does not lead to a red.
We encourage you to follow along with us. In the ITR Trends Report™, we take a fresh look at employment trends — as well as 50-plus other economic metrics — every month, and we include our forecasts for the next three years.