Fast Comment USSignificant Q2 slowdown in employment

The June non-farm payroll numbers came out a bit on the low side in June, where it added 80,000 people in total employment versus consensus estimates at 100,000. The expected number were probably even higher on the backside of some robust ADP numbers and the increasing employment index in the ISM non-manufacturing index. Hence, the employment growth trend has slowed, with the Q2 average decreasing to 75,000 from a more sound 225,000 in Q1. There were no revisions of significance on the total number.

Looking at the sector distribution in the employment numbers, the moderation was particularly visible in the services segment. The sector added only 71,000 - the lowest since August 2011. One positive sign, however, was that temporary help rose by 25,000, the highest since February. Manufacturing kept the subdued contribution around +10,000 from the previous two months, and finally there was some improvement within both construction (+2,000) and government (-4,000) employment. The latter was especially a relief after the downward revision in government employment of 28,000 in May.

All in all, the moderation in employment growth after the volatile weather influenced the beginning of the year seems indisputable, and it was especially worrying that it was the more domestically dependent service sector that eased. This adds to signs that the US economy is having a hard time keeping a growth story decoupled from the rest of the world. With this kind of employment growth, it is increasingly likely that the unemployment rate is about to stagnate and could even transition to an increasing trend in H2 of this year. Today, however, it was unchanged at 8.2%, as expected. This might very well call for more pronounced easing policies from the Fed, though this is not yet a done deal. One small positive was that average weekly hours increased and that average hourly earnings rose by 0.3%, but this is hardly a sign that the income picture is about to improve.