US Job Growth Rebounds In June, But 1-Year Trend Eases

US companies added 187,000 workers to payrolls in June, a moderate improvement over the upwardly revised 159,000 increase in the previous month, the Labor Department reports. That’s a healthy gain that suggests the economy overall remains on a positive track for the near term. But the year-over-year trend continues to point to softer growth generally for the labor market – a sign that economic activity may be vulnerable to deceleration in the second half of the year.

Today’s numbers, on balance, however, offer a dose of encouragement. Most sectors of the labor market posted firmer gains last month, including the cyclically sensitive goods-producing slice of the economy.

“We’re seeing pretty steady, solid hiring,” Michael Feroli, chief US economist at JPMorgan Chase, tells Bloomberg. “We’re just not seeing much acceleration in wages.”

Another issue to monitor in the labor market is the ongoing deceleration in the annual growth trend. Private-sector employment increased 1.72% in the year through June, down from 1.79% in the previous month. The latest year-over-year pace marks the fourth-slowest gain in over two years, and well below the post-recession peak of 2.57% in February 2015.

The good news is that the downshift in the employment growth trend remains gradual. At some point, if the slowdown continues, the slide will create a new headwind for the US economy. But using recent history as a guide implies that a relatively healthy rate of job growth will continue to hold for the next year or two, perhaps a bit longer, depending on how (or if?) the deceleration unfolds.

Nonetheless, today’s data suggests that there’s still a low probability that economic growth will soon accelerate in meaningful, sustained degree. Wall Street economists are projecting that second-quarter GDP growth will pick up to respectable 2.8% (seasonally adjusted annual rate) after Q1’s weak 1.4% gain, according to survey data from CNBC (as of July 6). Today’s employment report more or less aligns with that estimate.

Overall, the case is still encouraging for expecting that moderate growth will continue for the foreseeable future. Recession risk is still low and the labor market’s forward momentum points to more of the same in the months ahead.

“We’re just motoring along at a steady pace, [with] not much let up,” observes Kevin Logan, chief US economist at HSBC.

Some analysts advise that because the recovery from the Great Recession has been relatively weak, the economic expansion will last longer than usual. Last month marked the eighth year of recovery, the third-longest economic expansion in US history, according to NBER data.

Is the compensation for a historically sluggish expansion a recovery that lasts longer, perhaps setting a new record for endurance? By some accounts, that’s a reasonable assumption. If it’s valid, softer employment growth in the months ahead will tick lower at a sleepy pace, perhaps even stabilizing at some point.

The casualty in all this is the expectation that a Trump bump is near. Anything’s possible, of course, but that outlook was always a bit far-fetched and today’s employment report doesn’t offer much support for thinking otherwise.

At the same time, the pessimists won’t find much raw meat in today’s results either. The economy’s not booming, and doesn’t appear set to shift into a higher gear anytime soon. But a moderate pace of economic activity is intact.

“Growth is modest, not spectacular, which is to be expected for a mature expansion,” notes Mark Hamrick, senior economic analyst at Bankrate.com.

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