2 Steps Forward, 1 Step Back For Jobs As Fed Watches (Labor Participation Hits 38-year Low)BY ANDREA RIQUIER, INVESTOR'S BUSINESS DAILY
07/02/2015 06:33 PM ET
Job gains stayed healthy in June and the unemployment rate hit a seven-year low, but workforce participation skidded and wage growth remained anemic, muddling views of the labor market for a central bank seeking clarity.
Employers added 223,000 jobs, the Labor Department said Thursday, about as many as economists had forecast, and the jobless rate fell to 5.3% from 5.5%. The number of people working part-time because they can't find full-time work fell, as did the number of long-term unemployed.
But 432,000 people left the workforce, and the labor force participation rate fell to 62.6%, the lowest since 1977. Wage growth, which economists had expected would accelerate to an annual rate of 2.3%, instead dipped to 2%.
"It was a touch disappointing," said David Rosenberg, chief economist for Gluskin Sheff. "Nice jobs, shame about the wages."
Rosenberg and other analysts have been consistently frustrated by the sluggish pace of income growth in the current economic expansion. Most think stronger wage gains are critical for more robust growth, to bolster everything from retail sales to home purchases.
Still No 'Smoking Gun'That's a view Federal Reserve policymakers share. While most central bank watchers believe the first rate hike will come in September, Rosenberg has long believed policymakers' bias toward caution will delay "liftoff" until 2016.
"Only a fool would rule out September," he said. "But based on what they're telling us, I don't see the smoking gun. Does the Fed have runaway economic growth that it has to lean against, burgeoning inflationary pressure, an asset bubble? The answer is no."
Alan Levenson, chief economist for T. Rowe Price, was a bit more upbeat.
"We've got a good pace of employment growth, and that's not disappointing," he said. "As long as the payroll growth trend is intact, the economy is moving in the right direction."
Job gains have averaged 208,000 per month in 2015. While that's down from a white-hot and likely unsustainable pace of 260,000 in 2014, it's still more than double the amount needed to absorb population growth, Levenson said.
He pointed to auto sales that have run at the strongest pace in a decade, a pop in homebuilding and buying, and brighter retail sales figures.
"The Fed's message last month is we want to see more evidence that the economy is sustaining growth," Levenson said. "All those point to demand that accelerated in Q2, which does sustain employment growth which will in time take down the unemployment rate and raise wages. The story's still intact."
Another encouraging sign in June's data, Levenson said, was a slight uptick in extraction jobs, a signal that the oil patch may be stabilizing after a steep drop in crude prices.
But Rosenberg still has some concerns: "There is still a lack of verve in the workforce regarding walking into the boss's offices and asking for a raise."
It's also worrisome that an improving labor market doesn't seem to be pulling people off the sidelines.
"Really, one of the big stories is this continued disengagement from the working-age population from the workforce," Rosenberg said. "There's no question."
http://news.investors.com/economy/070215-760109-muddled-jobs-data-will-make-feds-job-harder.htm
