Mixed Jobs Report Sends Message to Employers

By Toni Vranjes

July 2, 2015

Although payrolls increased by 223,000 last month and the jobless rate fell to a seven-year low, the new employment report contains some worrisome signs.

Unemployment declined from 5.5 percent to 5.3 percent in June, the Labor Department reported today. However, that drop was driven by a 432,000 decline in the labor force. The labor-force participation rate — the percentage of the population that is either employed or looking for a job  — dropped from 62.9 percent to 62.6 percent.

down_arrow_5_pt_3In an analysis of the report, IHS Chief Economist Nariman Behravesh wrote that the drop in the labor-force participation rate “to levels last seen 38 years ago is both a puzzle and a worry.”

The 223,000 new jobs for June were spread across many industries, including professional and business services, health care, and retail trade. Behravesh noted that job gains in the second quarter averaged 221,000, up from 195,000 in the first quarter.

But the picture of the previous two months is less rosy than it initially seemed. For April and May combined, job growth was revised downward by 60,000.

Wages are another concern. Average hourly earnings were unchanged at $24.95, the Labor Department stated. According to Indeed Chief Economist Tara Sinclair, the weak wage growth shows that “there is more room for employers to hire if they increase pay.”

“The key takeaway for employers — many of which are looking to hire — is to raise wages to entice people to sign on,” Sinclair said in an e-mail. “If that’s not possible, they should be trying to give other incentives such as ideal location or job flexibility.”

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