June Unemployment Rate Declines to 9.5%

The national unemployment rate declined to 9.5% in June from 9.7% in May, while 125,000 jobs were lost, according to the Bureau of Labor Statistics. It's another one of those tricky reports this month, as the rate fell at the same time as jobs. Although this is the lowest the unemployment rate has been since it hit 9.4% in July 2009, this is also the first month we've seen net job losses since January. How do we make sense of these numbers?

As always, let's start with the historical charts for rate and jobs gained/lost:

The key to understanding today's data is to take into account Census hiring -- or firing in June's case. Since May was the peak for temporary Census jobs, 225,000 of those workers were no longer needed and thrust back into the unemployment lines in June. So while Census jobs brought the number down last month, they had brought the number up in the prior few months. Here's a chart that helps:

As you can see, taking Census out of the equation makes picture look a whole lot better, with job growth of 100,000.

So why did the rate manage to decline despite net job losses? There were fewer unemployed Americans at 14.6 million, compared to 15 million in May. There could be a few reasons for this. One is that there were more discouraged workers, with the number edging up by 124,000 to 1.2 million:

Another likely cause of the confusion has to do with seasonal adjustment. The seasonally unadjusted rate increased this month, which accurately reflects more unemployed Americans. But the adjusted count shows fewer unemployed:

So this month's data is a little bit tricky, because June is one of those months where the seasonally adjusted and unadjusted lines tend to cross. That makes it difficult to compare with the previous few months.

The seasonally adjusted measure for underemployment, so called 'U-6' -- including discouraged and marginally attached job seekers, as well as those forced to work part-time -- edged down to 16.5% from 16.6% in May. Another slightly better result came from the long-term unemployed. There were 12,000 fewer job seekers unemployed for 27 weeks or more. Of course, given the increase in discouraged workers, it's difficult to tell whether this really reflects these Americans getting jobs or giving up on the labor market.

The private sector saw job growth of 83,000. That's better than May's anemic 41,000, but not high enough to get very excited about. For particular industries, the news was mostly good:

Professional services, business services, leisure, and hospitality are all sectors that you want to see doing well. Spending in these industries generally reflects increased economic health, so it's a positive sign that these sectors led the job growth. But construction and financial activities continue to struggle.

We'll probably have to wait until we get rid of all the Census and seasonality noise to fully understand the way the labor market is evolving. But the narrative essentially sounds something like: job growth wasn't quite as strong as we thought it was during the spring, and probably won't be as resilient as we hoped it would be during the summer. With private sector jobs continuing to grow, though at a crawl, at least we're on the right path. It's just going to be a slow recovery for employment.

As far as the poll results go, readers didn't do so well this time around when it came to predicting the unemployment rate. Just 6% got it right. But a whopping 55% correctly predicted that jobs would be lost. Unfortunately, I can't tell if there's any overlap between those two stats. But if anyone did manage to correctly guess both, then well done!