Note: I am pleased to announce that the Financial Pocket will be moving to Mondays starting July 7. I will report on interesting financial stories, and provide you with some insight on what to expect in the upcoming week.
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Non-farm payrolls increased by 195,000 in June, with the unemployment level holding firm at 7.6%. The creation of 195,000 jobs is a good thing for 195,000 Americans, no doubt about it. But there are some troubling aspects to this jobs report.
Unemployment amongst the young (24%), African-Americans (13.7%), and Hispanics (9.9%) are still staggeringly high.
The worst part of the jobs report? This:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 322,000 to 8.2 million in June. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
This is a direct result of Obamacare. It is not surprising that business are avoiding the Employer Mandate (which requires businesses over 50 employees to provide health insurance to their full-time employees, or pay a penalty) by simply reducing the hours of their workers.
When governments regulate, businesses innovate.
Here’s some more of the jobs report breakdown:
Leisure and hospitality added 75,000 jobs in June. Monthly job growth in this industry has averaged 55,000 thus far in 2013, almost twice the average gain of 30,000 per month in 2012.
To me, these types of jobs are subject to the state of the economy. If the economy slows down, leisure and hospitality can suffer. Is this a sign of things getting back to normal, or are we getting ahead of ourselves?
Employment in professional and business services rose by 53,000 in June. Job gains occurred in management and technical consulting services (+8,000) and in computer systems design and related services (+7,000). Employment continued to trend up in temporary help services (+10,000). Over the past year, professional and business services has added 624,000 jobs.
An increase of business services is a good thing. Seeing jobs in these sectors makes me hopeful.
Retail trade employment increased by 37,000 in June. Within retail trade, employment increased by 9,000 in building material and garden supply stores and by 8,000 in motor vehicle and parts dealers. Employment in wholesale trade continued to trend up (+11,000).
Again, retail jobs would be the first to be cut if the economy is slowing down. Seeing car parts dealers hiring is a positive sign.
Health care continued to add jobs in June, with a gain of 20,000. Within the industry, employment continued to trend up in ambulatory health care services (+13,000). A gain of 5,000 jobs in hospitals followed a loss of 8,000 jobs in May.
Despite the fact that the Obamacare Employer Mandate has been delayed, the boomer health care boom is in tact. We simply need more health care professionals, due to the increasing amount of retirees, as well as health care legislation. Of course, hiring as a result of government interference in the free market is not the most efficient way to create job growth.
Employment in financial activities rose by 17,000 in June, with most of the increase occurring in credit intermediation (+6,000) and in insurance carriers and related activities (+6,000).
Again, financial services and related activities growth is a positive sign.
Federal government employment continued to trend down in June (-5,000) and has declined by 65,000 over the past 12 months.
Employment in most other major industries, including mining and logging, construction, manufacturing, and transportation and warehousing, showed little change in June.
This, not so much. On the one hand, it is summertime and companies in these big industries may not be hiring yet. However, no strong economy has no growth in mining, logging, construction, and manufacturing. If these number are not growing, we likely will be stuck in sub-par job and GDP growth for a while.
The takeaway? Adding 195,000 jobs to the economy means that in June, 195,000 people were not having to collect unemployment, borrow from family members, and were (hopefully) getting back on their feet. That is assuredly a great thing. I have noted that we need to create around 150,000 jobs per month to keep up with population growth. So really, if you look at things through that lens, the economy grew by 45,000 jobs in June. That’s not the growth we need.
If I were advising the powers that be, I would recommend that the government cut as much regulation as possible–permanently. Regulations such as Obamacare, proposed carbon emissions regulations, etc. do nothing but cripple our businesses (particularly small business) and slow down hiring growth.
As always, free markets are better markets.