Employers may be having a hard time finding workers, but recent graduates and students may be helping fill the ranks this summer and that trend could have bumped up June’s job growth.
“Our forecast…embeds solid summer hiring of students and recent graduates, and we note that job growth tends to accelerate in June when the labor market is tight,” according to economists at Goldman Sach, who said they expect 200,000 jobs were created in June and that unemployment slipped to 3.7 percent from 3.8 percent.
The consensus of Wall Street’s economists’ is that 195,000 payrolls were added and that unemployment was unchanged at 3.8 percent, according to Reuters. May job growth totaled 223,000, but a softer than expected June ADP report, with 177,000 private payrolls in June, signaled a possibly softer number for June.
The ADP report, below 200,000 for a fourth month, could be signalling softness in job growth due to a lack of workers.
Markets will no doubt be most interested in wage growth, expected at a monthly gain of 0.3 percent, or an annual gain of 2.8 percent, a respectable pace. Economists expect that tightness in the job market to start pressuring wage growth at some point, but it’s been tame so far, signaling little inflationary pressure and therefore no reason for the Fed to increase its pace of interest rate hikes.
“I think we’ll have good numbers. I’m at 205,000,” said Ward McCarthy, chief financial economist at Jefferies. He expects unemployment at 3.7 percent but wage growth of only 0.2 percent.
“Consistently through this cycle, June has been a weak month for hourly average earnings…and part of the reason is you have all the college kids coming in,” said McCarthy.
McCarthy said the worker shortage has been showing up in all sorts of data, but June is often a solid month for hiring, and he expects more of the same this year. “We still have record job openings, so there’s lots of jobs out there and people are resorting to retraining people when they can’t find who they want,” he said. “That might make hiring a little slower than they like it to be, but it’s still going to happen.”
In general, he expects the wage picture is stronger than it appears since the data is reflecting demographic changes. For instance, he said higher paid baby boomers are dropping out of the work force and they are being replaced by lower paid millennials, a trend that is impacting the rate of wage growth.