KEY MARKET INDICATORS as of July 10, 2017
June Jobs Report
The job market rebounded in June and job growth for the previous two months were revised higher. Employers added 222,000 jobs over the month. The unemployment rate rose slightly to 4.4% as more potential workers entered the labor force. The one disappointment is that wage growth remained stuck at just 2.5% despite the economy being at full employment.
Among major industries, leisure and hospitality, education and health, and professional business services had a good month, adding a combined 151,000 jobs in June. Hiring in construction added 16,000 jobs, with housing-related construction adding 6,000 jobs. Construction, along with professional business services are two of the fastest-growing industries in the economies in the past 12 months – growing by over 3% while the entire U.S. economy added 1.6% jobs. Manufacturing employment was flat. With auto sales posting year-over-year declines, employment in the motor vehicle and parts manufacturing has posted three months of decline and may prove a source of weakness. Employment in natural resources and mining is one bright spot in the labor market. Since May 2016, the number of active rotary rigs has rebounded 133%, and employment in mining is up 9% since October.
The job market continues to be very positive for potential first-time homebuyers. Unemployment rate for people in the primary homebuying age (25-34 and 35-44) fell to 3.9% in June, which is the lowest level since June 2007. It is also not far from the trough of 3.7% reached in the last economic cycle.
It is useful to look back at the first half of the year, which takes away the monthly volatility. The U.S. economy continued to add jobs at a brisk pace in the first-half. Despite already-low unemployment rate, job growth did not see a further slowdown from the 2016-level. As a result, the unemployment rate has come down from 4.7% at the end of 2016 to 4.4%. Tightening in the job market in the past few months has not resulted in faster wage growth, as average hourly earnings decelerated during the second quarter. The slowdown in wage growth will likely ease inflationary pressure, and that means there is no urgent need for the Fed to raise short-term interest rates.
* FHFA Purchase-Only Home Price Index