Labor Market Recovers Further in June

Key Takeaways:

• The minutes from the Federal Open Market Committee’s June 9-10 meeting show that participants expect “personal consumption expenditures to grow strongly in the second half of the year” given supportive monetary and fiscal policies. The CARES Act in particular should provide support for the next few months, though its expiration creates uncertainty and the risks for businesses remain high, which has weighed on capital expenditures.
• Nonfarm payroll employment jumped by 4.8 million in June, according to the Bureau of Labor Statistics, the second straight monthly gain, though still over 13 million payrolls lower than the March level. Over half of June’s increase was in the leisure/hospitality and retail trade sectors. The unemployment rate dropped 2.2 percentage points to 11.1 percent, though it remains 7.6 percentage points above its February level. Average hourly earnings increased 5.0 percent year over year, a slight deceleration from May, reflecting a compositional shift in employment back toward hourly wage workers. Residential construction employment (which includes specialty contractors) increased by 83,200 jobs.
• The Conference Board Consumer Confidence Index jumped 12.2 points in June to 98.1, the largest increase since November 2011, but well below early 2020 highs. While consumers’ confidence in the present situation increased by a larger amount over the month than consumer expectations, the latter remains much closer to pre-COVID levels.
• Light vehicle sales rose 8.1 percent to a seasonally adjusted annualized rate (SAAR) of 13.2 million units in June, according to Autodata. During the second quarter, sales fell for the third consecutive quarter to a SAAR of 11.3 million units, the lowest level in 10 years.
• The ISM Manufacturing Index increased 9.5 points in June to 52.6, the first reading above 50 since February (any reading above 50 indicates expansion). The rise was driven by a record increase in the new orders index and the second-largest increase on record in the production index, which both rose above 50 for the first time since January and February, respectively.
• According to the Census Bureau, the real goods trade deficit (an input into the calculation of net exports) narrowed by approximately $6.0 billion to $86.5 billion in May as exports and imports fell 5.9 percent and 0.4 percent, respectively.
• Factory orders rose 8.0 percent in May, according to the Census Bureau, while factory shipments rose 3.1 percent. Both new orders and shipments of nondurable goods increased 2.0 percent.
• The National Association of REALTORS® Pending Home Sales Index, which records contract signings of existing homes and typically leads closings by one to two months, jumped by a record 44.3 percent in May to 99.6. From a year ago, pending sales fell 5.1 percent.
• New private residential single-family construction spending dropped 8.5 percent, the largest decline since February 2009. Spending on new multifamily construction rose 2.3 percent, while home improvement spending ticked up by just 0.1 percent.