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Economic Watch: Trucking Left Out of Employment Surge

July 8, 2016

By Evan Lockridge

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While U.S. non-farm payrolls swelled by 287,000 jobs in June, the most since October, the number of trucking jobs fell for the fifth straight month, according to a new U.S. Labor Department report issued on Friday, July 8.

For-hire trucking employment fell by 6,300, for a loss of nearly 12,700 jobs since January, while the wider transportation and warehousing sector saw a loss of 9,400 jobs during June.

Despite an overall increase that beat Wall Street expectations by far, the nation’s unemployment rate moved up 0.2 of a percentage point from May to 4.9% in June as more people were looking for employment.

The change in total nonfarm payroll employment for April was revised from 123,000 job additions to an increase of 144,000, while the change for May was revised from 38,000 job gains to just 11,000. With these revisions, employment gains in April and May combined were 6,000 less, on net, than previously reported. Over the past three months, job gains have averaged 147,000 per month.

The bounceback in payroll employment largely reflected service-producing jobs jumping higher in the month following a negligible gain in May. The June increase in part reflected the return of the 35,000 striking telecommunication workers in May.

Goods-producing jobs managed an increase in June, though the relatively modest 9,000 increase only partially makes up for the 41,000 lost in May. The increase largely reflected manufacturing employment rising by 14,000 during the month.

However, the impressive overall June performance does little to reinstate a positive trajectory in hiring, according to Stifel Fixed Income Chief Economist Lindsey Piegza.

“Remember it’s not about just one or two months data, it’s about the trend pace," she explained. "The three-month average rose from 115,000 to 147,000 in June, down markedly, however, from a near 300,000 pace at the end of 2015 when the Federal Reserve opted to raise interest rates for the first time in nine years."

The persistence of moderate gains may just indicate that labor markets are approaching capacity limits reflecting supply-side issues rather than firms opting to moderate hiring in the face of slowing demand, according to Paul Ferley, assistant chief economist at RBC Economics.

“Support for the former is provided by the recent upward trend in wage growth averaging 2.5% over the first half of this year relative to 2.3% in 2015 and 2.1% in 2014," he said. "Rising wages have helped offset the recent slowing in employment and contributed to consumer spending growth rebounding strongly in the second quarter.

“This recovery in both hiring and domestic spending on its own would argue for the Federal Reserve to start raising fed funds from current highly stimulative levels. However, the emergence of external uncertainty related to the recent Brexit vote is expected to delay any increases in fed funds until 2017.”

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