One Take Away from the June Jobs Report – Leisure and Hospital Industry Accounts for 21% of the New Jobs

Jeffrey Megar, CFA,  Co-Portfolio Manager

Non-farm payroll numbers really surprised on the upside in June after severely disappointing in May.  Friday’s job number of 287,000 new jobs added in June was about 100,000 more than the market expected.  Interesting, and a change from previous months, leisure and hospitality was one of the leading sectors for new jobs last month along with the more traditional education and health services sector.  Leisure and hospitality added 59,000 jobs last month as opposed to loosing 3,000 in May and adding only 15,000 in April.  Seasonality clearly drives part of the growth in this sector as we get into the summer month, but the new jobs added in the leisure and hospitality sectors accounted for over 20% of last month total job growth, compared to 13% in June 2015.  Could this be pointing to an expectation of growth in the US economy?

In our mind two things account for this increase in the leisure and hospitality industry.  One of course is tourism.  According to the National Travel & Tourism Office, total Travel and Tourism Related Exports (receipts) was up 4% in the first quarter of 2016 relative to the year earlier period.  Regardless of the strength of the US dollar and/or the weakness of other economies, over 38 million people entered the US in 2015 from all parts of the world (ex. Canada and Mexico).  This was up almost 10% from 2014.  Further, the U.S. Department of Commerce announced that international visitors spent $21 billion on travel and tourism related activities in the US in May.  This was a tick down from the year ago period, but still a longer term positive trend.


The other component that might be driving the job growth in the leisure and hospitality industry is the US consumer.  Consumer confidence, though off its 12-month peak, is still up in June relative to earlier this year.  Further, disposable income is at a 12-month peak (see charts below).  Generally speaking, regardless of soft economic data we may see, it seems the US consumer is feeling better and starting to enjoy themselves.


job-report3But please take caution, we do not know as yet the pressure BREXIT will put on our tourism industry as well as the US consumer, let alone the broader economy.  Market uncertainty is never a good thing and could easily lead to malaise or worse.  Unfortunately, we’re in a wait and see environment and possibly will be for some time.

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