Meet the Author

Yoonsoo Lee |

Research Economist

Yoonsoo Lee

Yoonsoo Lee was formerly a research economist in the Research Department. His areas of research include macroeconomics, labor economics, and regional economics.

Meet the Author

Beth Mowry |

Research Assistant

Beth Mowry

Beth Mowry was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. Her work focuses on labor markets and business cycles.

07.08.08

Economic Trends

The Employment Situation

Yoonsoo Lee and Beth Mowry

Today’s Employment Report revealed a net decline of 62,000 jobs in June, in line with expectations and identical to May’s 62,000 drop (after revision). Combined downward revisions for April and May amount to an added loss of 52,000 jobs for those months. This report brings the sixth consecutive month of decline, which began in January. Average monthly job losses for the second quarter were about 64,000, compared to an average of 82,000 in the first quarter. The diffusion index of employment change improved slightly, edging up from 45.6 in May to 46.9 in June. The reading below 50 indicates that over half of all industries are still cutting back on employment.

The goods-producing sector registered its fifteenth consecutive month of decline, losing 69,000 jobs in June and surpassing May’s loss of 54,000. The only major industry within this sector to add jobs was natural resources and mining. Service-providing industries narrowly squeezed by with a small gain of 7,000 jobs. Discounting the government’s addition of 29,000 jobs, however, leaves private services with a loss of 22,000. Furthermore, May’s 8,000 gain in services was entirely erased and revised instead to a loss of 8,000 jobs in today’s report.

Table 1. Labor Market Conditions and Revisions
  Average monthly change (Thousands of employees, NAICS)

April current

Revision to April

May current

Revision to May

June 2008
Payroll Employment −67 −39 −62 −13 −62
Goods-producing −109 −9 −54 3 −69
Construction −59 −7 −37 −3 −43
Heavy and civil engineering −9.5 1 −3 1 −5
Residentiala −32 −5 −30 5 −21
Nonresidentialb −17.5 −3 −4 1 −17
Manufacturing −52 −3 −22 4 33
Durable goods −45 −1 −14 5 −16
Nondurable goods −7 −2 −8 −1 −17
Service-providing 42 −30 −8 −16 7
Retail trade −46 −7 −23 5 −8
Financial activitiesc −2 −3 −3 −2 −10
PBSd 17 −15 −49 −10 51
Temporary help services −19 −7 −32 −2 −30
Education and health services 48 −13 44 −10 29
Leisure and hospitality 14 2 9 −3 24
Government 24 12 29 12 29
Local educational services −4 1 12 −2 0
  1. Includes construction of residential buildings and residential specialty trade contractors.
  2. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
  3. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
  4. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
  5. Source: Bureau of Labor Statistics.

Within the goods-producing sector, construction shed 43,000 jobs and manufacturing shed 33,000. Durable and nondurable goods manufacturing faced similar losses amounting to 16,000 and 17,000 jobs, respectively. Within durable goods, fabricated metal products (−9,300) and wood products (−5,600) suffered the greatest losses. Transportation equipment was one of the few subsectors to add jobs during the month (7,100). Sectors experiencing notable losses within nondurable goods were printing and related support activities (−5,800) and textile mills (−3,200).

The small overall gain in service-providing industries was the result of very mixed performances in its subsectors. Gaining jobs were education and health services (29,000) and leisure and hospitality (24,000). Losing jobs were professional business services (−51,000), financial activities (−10,000), trade, transportation, and utilities (-9,000), and information (−4,000). Retail trade lost 7,500 jobs, an improvement compared to May’s loss of 22,600 and April’s loss of 45,700. Some of the biggest losses in the professional business service sector were felt by administrative and support services, which lost a whopping 70,200 jobs, and temporary help services, which lost 30,400. Temporary help services is often regarded as a leading indicator of overall employment conditions, so this loss does not paint an optimistic picture of the labor market in the near future.

Table 2. Labor Market Conditions
  Average monthly change (Thousands of employees, NAICS)
2005 2006 2007 YTD 2008 June 2008
Payroll Employment 211 175 91 −73 −62
Goods-producing 32 3 −38 −79 −69
Construction 35 13 −19 −42 −43
Heavy and civil engineering 4 3 −1 −6 −4.9
Residentiala 11 −2 −10 −29 −21
Nonresidentialb 4 7 1 −9 −16.6
Manufacturing −7 −14 −22 −39 −33
Durable goods 2 −4 −16 −27 −16
Nondurable goods -8 -10 -6 −12 −17
Service-providing 179 172 130 6 7
Retail trade 19 5 6 −27 −7.5
Financial activitiesc 14 9 −9 −6 −10
PBSd 56 46 26 −33 51
Temporary help services 17 1 −7 −26 −30.4
Education and health services 36 39 44 44 29
Leisure and hospitality 23 32 29 15 14
Government 14 16 21 21 29
Local educational services 6 6 5 5 −0.2
  Average for period (percent)
Civilian unemployment rate 5.1 4.6 4.6 5.1 5.5
  1. Includes construction of residential buildings and residential specialty trade contractors.
  2. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
  3. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
  4. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
  5. Source: Bureau of Labor Statistics.

The three-month moving average of private sector employment growth remains well in negative territory and relatively unchanged from the previous report at -91,000. The moving average has been negative since January.

While employment dropped 155,000, 144,000 people left the labor force, leaving the unemployment rate unchanged at 5.5 percent. A sharp increase (0.5 percentage point) in the unemployment rate in the May report was particularly concerning, although the series was thought to be noisy with an unusually high increase in teenage unemployment.

The labor market activity of teenagers around this time of year is tricky to measure. In May, the unemployment rate for teenage workers increased from 15.4 percent to 18.7 percent, as large numbers of young workers entered the labor market but had yet to find jobs. June’s unemployment rate for teenagers sagged slightly to 18.1 percent but remains at a very high level. However, 359,000 teenagers left the labor force this month, which is a large number considering the overall labor force decline of 144,000. Meanwhile, the unemployment rate for workers aged 25 and older increased slightly from 4.1 percent to 4.3 percent.