Payroll Growth Enough to Tip the Fed’s Hand in September

Economic Pulse
July 6, 2015
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June’s payroll figures were largely in-line with consensus, although downward revisions to the April and May figures, in tandem with a large exodus of unemployed workers from the labor force, were disappointing news. Nonetheless, nonfarm payroll employment rose by 223,000 in June, accompanied by a healthy increase in office employment of 91,000 (Table 1 and Chart 1).

Table 1. Monthly Change in Office-Using Payrolls by Category (000s, SA)

Monthly Change in Office-Using Payrolls by Category (000s, SA)

Chart 1. Office-Using Employment and Total Payrolls, June 2007 – June 2015 (Seasonally-Adjusted, 000s)

Office-Using Employment and Total Payrolls, June 2007 – June 2015 (Seasonally-Adjusted, 000s)

Employment in professional and business services rose by 64,000 in June—roughly in line with the average monthly gain of 57,000 over the prior 12 months—led by temporary help services (+19,800), architectural and engineering services (+4,400), and computer systems design and related services (+4,400). Employment in financial activities increased by 20,000 in June, despite the fact that employment in commercial banking declined by 6,300 over the month (and by almost 20,000 over the past year.) In the information sector, job gains totaled 7,000, with positive contributions from data processing/hosting services (+2,000) and motion picture/sound recording industries (+2,000).

While there was no change in average hourly earnings on the month, average hourly earnings have risen by 2 percent over the past 12 months, during which time the change in consumer prices has been zero. There appears to be little relationship between (recent downward moves) in the unemployment rate and wage gains (Chart 2) suggesting that a Fed that waits for further declines in the unemployment rate is unlikely to see substantial wage gains—leaving little to be gained by waiting beyond September to tighten rates.

Chart 2. Percentage Change in Average Hourly Earnings versus Change in Unemployment Rate, by Sector (annual data, June of each year, 2007 - 2015)

CPercentage Change in Average Hourly Earnings versus Change in Unemployment Rate, by Sector (annual data, June of each year, 2007 - 2015)