On Friday, the Bureau of Labor Statistics released their employment report for the month of June — and the results were very good. With 287,000 new jobs added to the US labor market, this report signals a reversal after several months of declining labor market gains. After a trend of weak numbers leading up to last month’s meager payroll increase of 11,000, this rebound shows that employers are still hiring at a solid clip and that the US economy is ending the first half of 2016 on a strong note.
In fact, this is the highest monthly jobs growth figure since October 2015, though weak numbers from April and May mean job gains over the past three months average about 147,000 — lower than the 200,000 we have become accustomed over the course of the economic recovery. Nevertheless, June’s numbers are still strong enough to more than accommodate new entrants to the labor market and signal continued economic strength.
It’s also encouraging to see the variety of industries that are adding headcounts. Leisure and hospitality and healthcare led payroll gains in June. Two key sectors, construction and manufacturing, remained flat. Mining employment continued its downward trend, although this is hardly a surprise after turmoil in the oil market over the past two years.
Another important result of this report is that it puts jobs gains figures in line with other labor market indicators, giving us a clear read on the state of employment. Employer demand is strong. JOLTS data through April indicate that job openings are at a record number. Moreover, unemployment insurance claims, a measure of how many people have been laid off from their jobs, is below prerecession levels.
All eyes across the pond
The data for this report were collected before the Brexit referendum, meaning that any apprehension employers may be feeling as a result of the vote are not reflected in these numbers. Looking ahead, the changing relationship between the UK and the European Union over the next two years will likely create a considerable uncertainty for the global economy.
Overall though, Brexit’s direct impact on US employers will likely be minimal. Exports from the US to the UK account for less than half a percentage point of our national GDP. The real risk for the US and for the world at large, albeit a small one, is the potential for continued unraveling of the EU. A geopolitical change of that magnitude would send shockwaves through the global economy.
If the UK had voted to remain in the EU, this jobs report could have brought into play an interest rate hike as early as September. As things stand, Janet Yellen and the Fed could hold off for the rest of the year unless job gains and wage growth really pick up steam in coming months.
What does this mean for employers?
For employers, all signs point to the continued tightening of the labor market. Job candidates increasingly find themselves with many employment options, allowing them to be choosier. This makes the job of recruiters harder, but it may pay off for companies in the long run. When candidates have many options, they are better able to find the right fit for them — meaning they have more freedom to choose the right job rather than any job.