Total nonfarm payroll employment rose by 528,000 in July, an increase from the 390,000 jobs added in June, according to the latest jobs report from the U.S. Bureau of Labor Statistics (BLS). The unemployment rate edged down from 3.6% in June to 3.5% in July.
“July’s jobs report reinforces the strength in the labor market but also complicates policy decisions for the Federal Reserve,” Zonda chief economist Ali Wolf says. “An economy that keeps growing at such a rapid clip suggests inflation will be harder to tame than initially thought. Today’s report tells us we should expect to continue seeing short-term rate increases until there are more notable signs of a cooling in the labor market or consumer prices.”
The number of unemployed individuals edged down slightly to 5.7 million during July, compared with 5.9 million in June. Both the unemployment rate and the number of unemployed persons have returned to their pre-COVID levels.
“As in recent months, job growth was concentrated in the service-providing segment, with the health care and social assistance (+97,000), leisure and hospitality (+96,000), and professional and business services (+89,000) sectors leading the way. We note that the level of payroll employment has reached the pre-pandemic level set in February 2020, finally erasing all of the job losses from the last two-and-a-half years,” says Fannie Mae chief economist Doug Duncan.
The labor force participation rate, at 62.1%, and the employment-population ratio, at 60%, were little changed month over month but remained below their February 2020 values.
Duncan says the “muted gains” in household employment, which grew by 179,000 in July, were “puzzling,” adding that the growth is far below the gains seen in the payroll survey and “illustrates a continuing divergence” between the two measures.
“For instance, since March, the payroll survey has shown roughly 1.7 million jobs added, while the household survey has actually shown a decline of 168,000 employed persons,” Duncan says. “This divergence gives us pause when interpreting the overall health of the labor market; in particular, compared to the robust job gains in the payroll survey, we feel the more subdued picture in the household survey may make more sense in the context of other recent economic indicators.”
Among the unemployed, the number of permanent job losers continues to trend down month over month. The July total of 1.2 million is 129,000 lower than in February 2020. The number of long-term unemployed decreased by 269,000 in July to 1.1 million, returning to its February 2020 level. The long-term unemployed accounted for 18.9% of the total unemployed in July.
“Wage growth continues to be hot, with today’s report indicating average hourly earnings grew at a 5.2% year-over-year pace, the same amount as last month’s report, another sign that firms are still eager to hire, and this continued wage growth is doing nothing to ease inflationary pressures in the economy,” Duncan says.
The number of persons not in the labor force who currently want a job was 5.9 million in July, little changed compared with June. These individuals are not counted as unemployed because they were not actively looking for work during the four weeks preceding the Household Survey or were unavailable to take a job. Among those not in the labor force, 548,000 individuals were prevented from looking for work due to the pandemic. Discouraged workers, a subset of individuals marginally attached to the labor force who believed that no jobs were available to them, numbered 424,000 in July, little changed from June.
Residential construction employment, including specialty trade contractors, increased by 14,100 in July. Duncan says while the residential construction employment growth number has been volatile in recent months, July’s gains “should help home builders to fulfill their current orders.”
