PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

June Jobs Report: Solid News on Jobs and Labor Force Participation – Entrepreneurship Remains a Concern

By at 6 July, 2018, 6:34 pm

by Raymond J. Keating-

Some of the headline numbers in the June jobs report from the U.S. Bureau of Labor Statistics require explanation. There were solid job gains, and labor force participation experienced a big jump. SBE Council also monitors the number of self-employed in the monthly report, which is an important measure of entrepreneurship. On that front, concerns remain.

Unemployment Rate: When “Bad News” Is Good News

As for data from the establishment survey, payrolls grew by a pretty solid 213,000 job in June, with April revised up from a gain of 159,000 to 175,000, and May from being up by 223,000 to 244,000.

Meanwhile, the more interesting, broad labor market numbers come via the household survey, which tends to be more volatile month-to-month, but also better captures small business and startup hiring. This also is where we get the unemployment rate, which actually increased from 3.8 percent in May to 4.0 percent in June. While clearly the most quoted jobs-related number, it has limited value since both levels and movements in the unemployment rate can be misleading in terms of what’s actually going on in the labor market.

For example, most would see an increase in the unemployment rate as a negative. However, that is not always the case, including in the June 2018 data. The unemployment rate increased in June because there was a big jump in the labor force – increasing by 601,000 in June – and the accompanying labor force participation rate increased from 62.7 percent in May to 62.9 percent in June. More people came back into the labor force, and that’s good news, especially given that the trend was generally down throughout March to May, and we remain down from more traditional levels for an economic recovery/expansion period.

Meanwhile, employment according to the household survey rose by only 102,000 in June. That’s underwhelming, but it did come after a gain of 293,000 in May. Also, the employment-population ratio came in at 60.4 percent in June. That was the same as in three of the last four months, while also being registered in September of last year. Before that, though, 60.4 percent is the highest employment-population ratio since January 2009.

Troubling Self-Employment Numbers

The troubling numbers are to be found in two measures of entrepreneurship – unincorporated and incorporated self-employed. The unincorporated data is seasonally adjusted, so we can make month-to-month comparisons, and June came in at 9.464 million, which was down from 9.755 million in May and 9.793 million in March of this year.

The June level is the lowest since August of last year. For further perspective, the previous high came in at 10.912 million in April 2005.

Meanwhile, as for incorporated self-employed, this data is not seasonally adjusted, so we need to make comparisons to the same period in previous year. The June 2018 level registered 5.586 million, and that compared to 5.611 million in June 2017, and off from the high of 5.711 million in June 2008. In the last three months, the 2018 level was down versus the same month in 2017.

For the sake of economic, income and employment growth in the near term and over the long haul, a reignition of entrepreneurship in the U.S. is essential.  Thankfully, more businesses are now starting than closing, which was not the case from 2009-2011. Still, entrepreneurship has remained weak, especially among younger people.

It is imperative that the U.S. return to healthy levels of entrepreneurship as new business creation is vital to innovation, quality job creation, and economic mobility.  While progress has been made on the policy front via tax and regulatory relief, much work remains towards improving the business environment so that more people have the resources they need and take the risk of launching a business.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

 

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