June Jobs Report & AI Socialism Revealed

Policymakers should not confuse a low unemployment rate with a strong economy or industrial policy with strength.

Hello Friends,

As we celebrate Independence Day, I’m reminded of my time as chief economist at the White House before the disastrous government shutdowns crushed much of the economy during COVID-19. One of the best parts of that job was explaining a genuinely strong labor market: broad-based private hiring, rising participation, and real wage gains that helped families move up.

My job would be much harder today.

The latest June Employment Situation report⁠ shows unemployment at 4.2%, which looks good at first glance. But policymakers should know three things that headline misses.

Payrolls rose by only 57,000 jobs in June, and April and May were revised down by 74,000. Labor force participation fell to 61.5%, the lowest since June 2021. Average weekly earnings rose 3.8% over the year, but the latest CPI report⁠ shows prices up 4.2% and chained CPI⁠ up 4.0%, meaning workers’ weekly pay is barely keeping up or falling slightly in real terms.

That is not a collapse. But it is a warning.

The Headline Hides Weakness

The unemployment rate stayed at 4.2%⁠, and that matters. America is not in recession, and many people are still working.

But unemployment only counts people actively looking for work. If someone stops searching, retires early, or becomes discouraged, they disappear from the unemployment rate. That is why the participation drop matters so much.

The labor force participation rate fell by 0.3 percentage point in June to 61.5%, while the employment-population ratio declined to 59.0%. The number of people not in the labor force who still want a job was 6.0 million. Long-term unemployment remained elevated at 1.9 million and is up 286,000 over the year. Those numbers explain why many Americans feel the labor market is weaker than the headline suggests.

Private Hiring Is Slowing

The economy added 57,000 payroll jobs in June, roughly in line with the weak 36,000 average monthly gain over the prior year reported by BLS. Private payrolls added 49,000 jobs, but the composition matters.

Professional and business services rose by 36,000. Social assistance added 25,000. Health care added 22,000, slower than its 38,000 monthly average over the prior year. Leisure and hospitality lost 61,000 jobs. Construction, manufacturing, transportation, financial activities, retail, wholesale trade, information, mining, and government showed little or no change.

This is not the kind of broad-based private-sector growth policymakers should celebrate. A productive labor market is not measured only by payroll counts. It is measured by whether businesses are expanding, workers are producing more value, and families are seeing real earnings rise.

Wages Are Not Enough

Average hourly earnings rose 3.5% over the year to $37.64, while average weekly earnings rose from $1,243.51 last June to $1,291.05 this June, a 3.8% gain. Normally that would be solid. But inflation is still eating away too much of it.

The latest available CPI data show consumer prices up 4.2% over the year ending in May, and chained CPI, a better cost-of-living approximation, up 4.0%. On that basis, average weekly earnings are down about 0.2% using chained CPI and about 0.4% using CPI-U.

Since January 2021, average weekly earnings are up about 23.1%, from roughly $1,048.60 to $1,291.05, based on BLS hourly earnings and hours data. But consumer prices have risen more than that over the same period, with the FRED CPI-U index⁠ up 27.1% or chained CPI-U index up 26.1% since then. That means the typical private-sector worker’s weekly paycheck has not fully recovered in inflation-adjusted terms from the price surge that began in 2021, hence the affordability crisis.

This is why people don’t feel prosperous. They are not comparing today’s prices to last month. They are comparing them to what life cost inn2020 before Washington overspent, Fed over-accommodated, and government-forced supply constraints made everything worse.

Washington Should Not Own the Future

The second warning this week came from reports that OpenAI discussed giving the federal government a 5% equity stake⁠ tied to AI infrastructure politics.

That is exactly the wrong direction.

America did not become the world’s most innovative economy because Washington owned private companies. We became prosperous because free people built, invested, worked, failed, learned, competed, and created value.

Government should protect property rights, enforce contracts, secure the rule of law, and stop distorting markets. It should not sit on the cap table of America’s most important emerging firms.

As we celebrate independence, we should remember what made this country different. A constitutional republic with relatively free-market capitalism produced the best institutional framework for human flourishing ever known.

The North Star

The labor market is not broken, but it is losing steam. Real earnings remain under pressure. Participation is weak. Private hiring is not broad enough. And Washington is flirting with more control over the industries that should define the future.

The answer is not more government ownership, industrial policy, or deficit-financed stimulus. The answer is sustainable budgeting, lower marginal tax rates, lighter regulation, abundant energy, sound money, freer trade, and policies that reward work, investment, and entrepreneurship.

That will not just improve the next jobs report. It will strengthen the institutions that let people prosper.

Sincerely,

Vance Ginn, Ph.D.
President, Ginn Economic Consulting

If you value economic analysis rooted in free-market principles rather than political talking points, subscribe to this newsletter, share it with a friend, and see more of my work at vanceginn.com⁠.