Up Like a Rocket
The Tale of Two Surveys, Government Jobs, Immigration Absorbtion, Lower Churn, Fewer Hours
“Employment goes up like a rocket, and down like a feather”
Federal Reserve Bank of Chicago President Austan Goolsbee
June Payroll Preview
Although incoming data on demand for labor since the May employment report has softened marginally, it seems unlikely that the debate between the Household Survey and lagged data from the Quarterly Census of Employment and Wages (QCEW), relative to the robust gains in the Current Employment Statistics (CES) Establishment Survey, will be settled on Friday. Consensus expectations are for a 195,000 increase in nonfarm payrolls, a 4.0% unemployment rate and average hourly earnings 0.3% above May and 3.9% on an annualized basis. One of the potential explanations for the divergence between the two most widely watched metrics, an increase in the unemployment rate from 3.4% in April ‘23 to 4.0% in May ‘24 and an average monthly increase in nonfarm payrolls of 257,000 over the same time frame, is the surge in immigration. With the recent Biden Administration tightening of border controls, and the prospect of a much sharper deceleration in ‘25, employment growth seems likely to slow, however, we suspect slowing population growth will not be reflected in the June report. We have greater confidence that the increase in the unemployment report more accurately measures the state of the labor market, and there is a greater probability of another increase, rather than the rate settling near 4% for the foreseeable future as was the median forecast in the June FOMC Summary of Economic Projections. Wage growth is the biggest wildcard, the persistent drop in churn points to slower wage growth, but wage data has been erratic in ‘24.