This week, we have the latest on jobs and celebrate a great American holiday: Bobby Bonilla Day.
Job Growth Higher than Expected in June
Payrolls rose by 147,000 last month, easily beating the 110,000 WSJ estimate. Markets were worried yesterday about June hiring after the ADP data showed a loss of 33,000 private-sector jobs last month, but since the ADP and BLS reports never match each other maybe we shouldn’t have been too worried.
Here are the other highlights of the jobs report:
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The unemployment rate fell to 4.1% from 4.2%. Economists had expected the rate to rise to 4.3%, so this figure was also better than expected.
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Government added the most jobs last month (+73,000). This was due to state and local government hiring, as the federal government shed 7,000 jobs in June.
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Wages rose 0.2% last month and were 3.7% higher than a year ago. The annual growth in wages remains significantly higher than the 2.3% increase in prices during that time.
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Data for April and May were revised up by a total of 16,000 jobs.
While this report seems to be showing a pretty strong labor market, a deeper dive into the data curbs some of our enthusiasm:
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While employment growth was solid last month, 112,000 of the 147,000 jobs were in the government and health care sectors. Regular readers know that government and health care hiring aren’t directly tied to the health of the economy, and we’d rather see private sector industries not supported by the government creating jobs.
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While the unemployment rate did unexpectedly fall, that was due mostly to a decline in the number of Americans looking for work rather than brisk hiring.
Other labor market data released this week included:
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Initial claims for unemployment fell to 233,000 last week, a six-week low.
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The number of job openings rose to 7.77 million at the end of May, its highest level since November. This data lags the other reports by a month, so it should be viewed with a bit of caution.
What does this all mean:
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Hiring is still decent while layoffs remain low.
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There are still a lot of unfilled jobs out there, or at least there were at the end of May.
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Wages are still rising much faster than prices.
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Don’t expect the Fed to cut rates this month. As the old song goes, “See You in September.”
Our final item is about a day I like to celebrate each year.
Happy Bobby Bonilla Day
This is a day all Yankees fans look forward to, because each July 1st through 2035, the Mets must pay Bobby Bonilla $1,193,248.20. Ha.
How did this happen, and what does this have to do with economics or finance?
It all started when the Mets agreed to pay Brett Saberhagen $250,000 a year for 25 years instead of making one lump sum payment. The payments to Saberhagen end in 2029, and this was the inspiration for the Bonilla deal.
In 2000, the Mets bought out the remaining $5.9 million of Bonilla’s contract, but instead of just giving him that money, they agreed to make 25 annual payments of almost $1.2 million. When the payments end in 2035 Bonilla will be 72 years old.
Why would the Mets do this?
Well, because they’re the Mets, and here’s where the finance part comes in. As you may know, Mets ownership was heavily invested with Bernie Madoff, who promised them amazing—pun intended—returns on their investments. So, they figured why pay now when we’ll have truckloads of money later.
Leave it to the Mets to make the same mistake twice, but at least it will all be over in 10 years.
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