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By Jason Stipp and Robert Johnson, CFA | 07-05-2013 09:00 AM

Some for the Bulls, Some for the Bears in June Jobs Report

Although June payroll gains were better than recent averages and hourly earnings rose, the report was not entirely upbeat, says Morningstar's Bob Johnson.

Jason Stipp: I'm Jason Stipp for Morningstar.

We got the employment report from the government for the month of June on Friday. It showed a better-than-expected 195,000 jobs were added to the economy last month. This is a bit above what our director of economic analysis Bob Johnson was expecting. He is on the line with us now to give us his take on the number and where he sees the job market today.

Thanks for calling in, Bob.

Bob Johnson: Great to be here.

Stipp: The 195,000 was above the number that you were expecting. You were thinking around 150,000. What was your take on that top-line number? What did better than you expected?

Johnson: It was a good number, first of all, and I'm glad that I was wrong. I was a little worried about the report this month because June has historically been one of the weaker months of the year in the report. So, I was wrong, and I'm pleased that I was wrong and that the job growth was actually a little better than I thought.

One of the reasons it was better than I thought was some of the seasonal adjustment factors, which I thought would be a little bit of a hurt this month, actually turned out to be a bit of a help.

So, that was certainly one of the factors, and there were also a few strong sectors as well that pulled the numbers through. But overall, a strong number on the jobs growth side of the house.

Stipp: Let's talk about some of the sectors that did well. You said that there are a few things for the bulls in this report, and there are a few things for the bears in this report. The bears might be keying in on where the sector strength was in June.

Johnson: By far the biggest category was leisure and entertainment, and within that, restaurants were certainly the best. And those are certainly not always some of the better-paying jobs in the economy. But we did add 53,000 restaurant jobs, which is almost double the trend line that it usually is. So, that was the biggest upside surprise on the number. Retail was also strong, adding 37,000 jobs, but that wasn't so far off of trend. That wasn't such a remarkable number. The 53,000 restaurant jobs was really very good.

And on the other hand, on the downside, manufacturing wasn't so good, which tend to be thought of as better-paying, more stable, longer-term jobs. And those were down about 6,000 jobs. And also one other category that has me a little worried is health and education. It did add 20,000 jobs. But the bad news is that's almost half of trend, and again those are jobs that can bring in a fair number of people. They're usually … better than minimum-wage jobs--they're not maybe quite as good as manufacturing. It's a sector we would like to see do well, and it has done well, but health care and education were a little weak, with education actually losing 10,000 jobs.

Relative to the GDP report, I'm always a little fearful when health-care employment goes down, because that generally means the health-care portion of GDP will be going down as well.

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