Unemployment Down in June, yet Wages Stagnant

A drop in participation in the labor market artificially props up unemployment rate.
Katie Kuehner-HebertJuly 2, 2015

Jobs rose by 223,000 in June, slightly under economists’ forecasts, and the unemployment rate declined to 5.3%, the Labor Department said Thursday. However, the size of the workforce receded and wages were unchanged from May at $24.95, and up only 2% over the past year.

The unemployment rate in June was the lowest since April 2008, falling from 5.5% in May. However, the lower rate was mainly attributed to a drop in the labor force by 432,000 people. The participation rate, which indicates the share of the working-age population in the labor force, decreased to 62.6%, the lowest since October 1977, from 62.9%.

A Bloomberg article Thursday said the June figures point to a slowly moving economy following a first-quarter slump, which means the Federal Reserve will still likely raise interest rates later this year with subsequent increases coming only gradually.

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“The labor market is good, there’s just not any wage pressure,” Deutsche Bank Securities chief U.S. economist Joseph LaVorgna told Bloomberg. “The disappointment is on wages and on the participation rate.”

Some positive trends noted by the Labor Dept. included a drop in the share of people out of work for 27 weeks or longer to 25.8%, the lowest since March, 2009. The 2.8 point drop from May’s 28.6% was the biggest one-month decrease since records began in 1948, Bloomberg said. Moreover, the number of Americans working part-time for economic, rather than personal, reasons fell to 6.5 million, the fewest since 2008.

“That caused the underemployment rate, which includes discouraged workers who are no longer looking for a job and the part-timers who’d rather be full-time, to decrease to 10.5%, the lowest since July 2008, from 10.8% in May,” Bloomberg wrote. “The rate has dropped 1.5 percentage points over the past year compared with a 0.8 point decline in total joblessness.”