Job growth went well in June, when the economy added 224,000 workers to payrolls during the month. The transport and logistics sector was one of the many strengths in June, with improved profits among parcel and truck companies.
The Bureau of Labor Statistics (BLS) reported that the economy added 224,000 workers to payrolls in June. This exceeded consensus estimates of a 170,000 job gain and serves as an impressive rebound a marked decline from disappointing 72,000 gains last month. The 12-month moving average improved to 171,000 in June after falling below 150,000 in each of the last two months.
As was usually the case, job growth in June was primarily driven by the service sector, which added 154,000 jobs during the month. The benefits of professional services, education and healthcare led the way in the sector, contributing more than two-thirds of the growth of the job during the month. This helped mask some of the weakness elsewhere in the service side of the economy, including the fifth consecutive monthly decline in retail activity. On the goods side of the economy, construction work in June led to 21,000 jobs added. Rental in the production sector matched the year's largest gain during the month, while wage settlement increased by 17,000.
Despite the strength of employment, unemployment rose slightly to 3.7 per cent in June. This was driven by an increase in the workforce size, which increased by more than 300,000 as the workforce participated at 62.9 percent. Wage growth continued to climb at a gloomy pace, rising by 0.2 per cent from May. The result was that wage growth in the year was stable at 3.1 per cent in June.
Transport and logistics employ repayments, but employment in truck transport declines
In addition to professional services, education and health services, the transport and logistics sector was another source of strength in the job report in June. Jobs in the sector increased by an impressive 23,900 jobs during the month, marking the strongest growth since January. Part of this gain was driven by a decline in ground passengers and sightseeing transport, which added 5,500 jobs in June after having gone down last month. Freight transport and storage have also been good during the month, although continued battle in rail and water transport employment contributed almost nothing to the monthly gain. Package companies led the way between carriers during the month and added 6,500 workers in June.
In the trucking industry, hiring was at its fastest pace since January, when the industry added 4,300 employees to salaries in May. In addition, the growth from the last two months was revised with a combined 2600 jobs, which shows that the industry still has some positive momentum in the second half. The truck industry added an impressive 44,000 jobs in 2018, when rising demand and rising prices helped drive employment throughout the year. The pace of hiring in lorry transports has obviously slowed down since the prices in the industry have begun to cool down, but are still moving in a positive direction.
Behind the figures
The June results for the overall economy serve as a welcome sign of relief for the US economy. After May's disappointing job growth, other health indicators have also pointed to weakness in recent weeks, including overwhelming outcomes from jobless claims and this week's ADP employment outcomes. As a result, many began to wonder if one of the more consistent support for the overall economy began to fall. As a result, many analysts were thoroughly convinced that the Federal Reserve would act to stimulate the economy by cutting interest rates at its next meeting at the end of this month.
Considering the strength of June employed, Mays poor performance now looks more like a temporary fluctuation, which was probably driven by the surprising reversal of trade policy with China during the month. The labor market remains generally healthy in the middle of the year, which gives good results for retail in the future. That being said, the pace of employment has clearly shifted in the economy this year, as the 12-month moving average has a trend below 200,000 throughout most of the year. Wage growth has stood at around 3.0 to 3.25 percent throughout the year, so a Fed price cut is still quite likely this year and could come at its next meeting in late July.
On the trucking side, the results in June were an encouraging sign that the industry was under pressure from a softer freight economy and falling prices. It is a good time to remember that BLS figures are not a mere representation of the terms of industry drivers. For one, the monthly truck transports included the numbers all working on the rental side of the industry, including things like management and administration. In addition, BLS figures are wage numbers for employment, so less independent people who do not operate on payrolls do not count in the BLS results.
This is an important distinction between noting, because it is likely that these less independent drivers are most affected by current business conditions. The spot market rate has tumbled 20-30 per cent year-round during 2019, and smaller carriers exposed to the spot market are less likely to withstand corresponding decline in revenue. As a result, the official figures are likely to exceed the amount of job growth in the industry so far in 2019. Nevertheless, this morning's report was good news for the industry and paints a slightly better picture than was previously thought.
Ibrahiim Bayaan is the Chief Economist of Freight Waves. He writes regularly on all aspects of the economy and links with original research and analysis on freight market trends. Never miss his comment by subscribing to .