3.6%

I look forward to the jobs report coming out at 8:30 am on what is typically the first Friday of the month. If it's during the academic year, this is the news item that begins or ends class on Friday. And I get a particular thrill looking at the report(s), coming to my own conclusion, encouraging the kids to come to their own conclusion, and then (finally) seeing if our conclusions aligns with what the journalists and the markets are saying. 

So, how does the job market look? On a scale of cataclysmic bad to awesome, this one landed somewhere between okay and good (with meh being below okay and solid being above good). One of the two headline numbers is the unemployment rate which went down a little bit, from 3.7% to 3.6%. Down is good, but the difference between May's and June's numbers is very small. Further, we are about as low as possible with the unemployment rate. Due to frictional (firing and quitting), structural (when demand for one particular type of job dries up), and seasonal factors there should be about 4.0% of the population unemployed. So by the standard definition we are at or a smidge below full employment. By the way, here's the report. Oh, and please keep in mind that the unemployment rate tends to make things appear rosier than they really are. 

Looking at more lines on that report, we can see some hey-the-glass-is-half-full sort of numbers. The participation rate is unchanged. Long-term unemployment and discouraged workers are both decreasing. Part-time for economic reasons is also down a little bit. That's good news for a lot of Americans. 

There's a few ugly lines, too, though. The unemployment rate for black Americans jumped upwards. Same with Latino and Asian segments of our population. And youth unemployment went up, too. This is all suggesting some problems in the labor market related to the service industries. 

The other headline number is the quantity of jobs added. One finds that information on a sister report put out by the Bureau of Labor Statistics (here it is). Again there is a combination of good and bad news, with a little bit more good than bad. In June we saw 209,000 jobs added to the economy, lower than the benchmark I use of 225,000 in a good month in a healthy economy. The diffusion index is going the wrong way (I invite you to think 50.0 = bad and 75.0 = great), but it's rising for manufacturing. So, again, I'm seeing a pattern here that services might be weak but durable goods / manufacturing might be strong. 

One also finds wages and hours reported on this report. Those numbers seem to indicate upward movement in the economy. Both wages and hours are rising a smidge. That's good news for people at work. But will rising wages contribute to more inflation? More on inflation when that report comes out Wednesday.

Of course the markets reacted poorly on Friday, and that's where the irony of all the labor market stuff comes into play. We have a job market that's more good than bad but the markets swoon? Why would that occur? Because the markets worry about interest rates, and the Federal Reserve likely will resume raising interest rates later this month. The evidence suggests there's more slowing the economy needs to do to get inflation under control. And that leads to the big policy dilemma facing us right now. Inflation is more of a problem than jobs. To get inflation under control, one can make the jobs market worse. Ugh. More on that later.