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56 | TH E M REP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ANALYTICS THE LATEST Job Growth Takes Off in June; Unemployment at 6.1% There are still many people out of work, but a quarter million new jobs isn't bad. T he U.S. labor market outperformed expecta- tions by a wide margin in June, with gains in both April and May also revised upward. According to numbers from the Labor Department, employers added 288,000 jobs last month, soaring above economists' con- sensus forecast of 211,000 new jobs. Meanwhile, payroll addi- tions for April and May were re- vised up to 304,000 and 224,000, respectively, bringing gains in those months up 29,000 higher than previously reported. The latest pick-up in growth brought the nation's unemploy- ment rate down to 6.1 percent, a near six-year low. In comments offered before the release of Thursday's report, Gus Faucher, senior economist at PNC Financial Services Group, said that the formerly 6.3 percent rate of unemployment "understates the slack in the labor market." "There's a lot of long-term unem- ployed, [and] there's a lot of people looking for more work," he said. PNC had forecast payroll growth of 200,000 in June, with the unemployment rate remain- ing steady at 6.3 percent as more people joined the labor force. The labor force did indeed rise, but only by 81,000—not enough to boost the civilian labor force participation rate, which remained steady for the third straight month at 62.8 per- cent. However, Faucher believes any increase at this point is a positive: "If the unemployment rate holds steady because more people are looking for jobs ... that's overall a good thing." Out of the 9.5 million unem- ployed counted in the Labor Department's household survey, nearly a third—3.1 million—have been without a job for at least 27 weeks. Among those working, 7.5 mil- lion are employed part-time for economic reasons. The broader U-6 unemployment rate, which includes those workers and the 2.0 million people who want work but haven't searched in the last month, slid slightly to a seasonally adjusted 12.1 percent in June. Among those sectors see- ing major job gains last month, financial activities ranked near the top, adding 17,000, with real estate and rental and leasing trending up by 9,000. Other big increases were seen in food services, healthcare, and transportation and warehousing. Consumers Confident for the Moment, But Glum About Future Economic factors still don't have Americans convinced. A notable drop in gross domestic product (GDP) in the first quarter—the largest decline since 2009, according to the Bureau of Economic Analysis—did not appear to shake consumer confidence, according to the June Survey of Consumers from Thomson Reuters and the Univer- sity of Michigan. While GDP fell 2.9 percent in the first quarter, the June sentiment survey actually showed slight improvement over the month with a gain of 0.7 percent. The gain is a result of improve- ment in consumers' view of cur- rent conditions, which outweighed a small decline in their outlook on the future. The Current Conditions Index experienced a 2.2 percent increase in June, while the Index of Consumer Expectations ticked down 0.3 percent. "Given that they ignored the dismal first quarter results, they are also likely to ignore the an- nouncement of more favorable second quarter GDP results in the months ahead," said Richard Curtin, chief economist for the Surveys of Consumers. Consumers largely chalked up the GDP decline to the winter storms early in the year and ap- peared to be encouraged by recent job growth. In fact, more survey respondents reported improving finances than in any survey since 2007, according to the University of Michigan survey. Forty percent of households said their finances had improved in the June survey, an increase from 35 percent both last month and last year. A positive sign for the hous- ing market, about half of survey respondents reported "selling conditions were favorable for the first time in eight years," according to the survey. Despite their positive reflection of current conditions, consumers did not harbor a very optimistic outlook toward the future. Three out of four households do not ex- pect their finances to improve over the next year. The survey detected a broad-based concern that wage growth would not keep pace with inflation, "meaning that nearly half of all households anticipated de- clining living standards," according to the University of Michigan. The Thomson Reuters/ University of Michigan survey was released on the heels of the Consumer Confidence Index from the Conference Board. While both indexes reported overall increases in consumer confidence in June, they varied when it came to expectations. While the University of Michigan survey reported pes- simism based on wage growth, the Conference Board reported a rise in its Expectations Index based on anticipation of improv- ing business conditions and labor conditions. "If the unemployment rate holds steady because more people are looking for jobs . . . that's overall a good thing." — Gus Faucher, PNC Financial Services Group

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