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A Shockingly Good Jobs Report
Payroll Employment up 528k in July
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Last month, while I was on vacation, Zack titled our jobs report post “There’s No Mentum like Momentum.” It’s a terrible, nonsensical headline, and one I’ve stopped him from using countless times over the past decade. As much as it pains me to say it, it was also (somehow) correct; U.S. payroll employment expanded by 528,000 jobs in July, more than twice the consensus forecast of +250,000 jobs, and the previous two months figures were revised upward by a cumulative 28,000.
This report marks full labor market recovery from the devastating impacts of the pandemic in early 2020. Total payroll employment has now eclipsed its February 2020 level, and while the stated July unemployment rate of 3.5% is the same as February 2020’s, if you calculate it out to the hundredths (3.46%), it’s the lowest since the late 1960s.
Toss some confetti, pop some champagne, and then chug half the bottle and sit down, because here comes the bad the news. The labor force declined by 63,000 persons in July and is now down by 449,000 since March 2022. The labor force participation rate fell, down 0.1 pp to 62.1%, and is 1.3 pp below February 2020 levels, and the employment-to-population ratio inched up to 60.0% but is still 1.2 pp below pre-pandemic levels. As a result of this historically tight labor market, average hourly wages jumped another 0.5% for the month and remain up 5.2% year over year.
For months, we’ve been waiting for supply to improve and demand to return to earth, and there was a widespread expectation that this employment report would show those exact dynamics. Well, demand is still hotter than the surface of the sun, and the labor supply is somehow still contracting. Surely at some point inflation, fading fears of the pandemic, and rising fears of recession will drive Americans back into the workforce. That didn’t come to pass in July, though, and the Fed is now likely to raise interest rates by another 75 basis points at their next meeting.
Paid subscribers will get the full Week in Review post later today (and every Friday)
As always, you can read my in-depth thoughts regarding the construction industry’s labor market at Associated Builders and Contractors.
Three (somewhat) Key Takeaways
Employment in the leisure and hospitality industry remains 7.1%, or 1.2 million jobs, below February 2020 levels. At July’s pace of growth, it will take more than another year for the industry to reach full recovery.
Among adults 25 years and over, the labor force declined by more than 1 million for those with less than a bachelor’s degree and increased by 1.3 million for those with at least a bachelor’s degree.
Persons with a disability continue to join the workforce at a faster rate than the rest of the population. Over the past year, the labor force participation rate for those with a disability is up 1.3 pp while the labor force participation rate for those without a disability is up just 0.4 pp. I continue to attribute this to the rise of remote work.
What to Watch
Has inflation peaked? Can we finally stop asking that question? We’ll find out when the July CPI data comes out on Wednesday.
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