The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao.
The job market is showing no signs of cooling yet. Employers added 528,000 jobs in July, up significantly from 398,000 jobs added in June, easily smashing expectations. The unemployment rate dropped to 3.5 percent, tying the lowest level since February 2020, which was itself tied with the lowest level since 1969. While the broader economy is slowing, the labor market is still a bulwark holding back a rising tide of recession fears.
Jobs Growth Heats Up in Surprise Acceleration
Jobs growth rose to 528,000 jobs added in July, rising to the fastest pace since February 2021. After two-and-a-half years of the pandemic, payroll employment has finally returned to pre-pandemic levels, in one of the fastest job recoveries in decades.
Jobs growth was highest in health care & social assistance (96,600 jobs added) and leisure & hospitality (96,000), two industries that have the largest remaining shortfalls compared to pre-pandemic employment levels. Job gains, however, were broad-based with gains even in slowing industries like construction (32,000) and retail (21,600).
Unemployment Falls to 3.5 Percent Again
The unemployment rate fell to 3.5 percent after holding flat for several months in a row. 3.5 percent tying the pre-pandemic level from February 2020, which was also tied with the lowest level reached since 1969. The labor force participation, however, was lower in July, falling to 62.1 percent in July, down from 62.2 in June. In particular, labor force participation for Black men over 20 years old has plummeted, dropping to 67.3 percent in July, down from 68.9 percent in May.
Wage Growth Flat
Average hourly earnings grew 5.2 percent year-over-year in July, tied with the revised 5.2 percent growth in June, consistent with rising wages seen in other data like last week’s Employment Cost Index. Ongoing wage growth puts pressure on the Federal Reserve to continue tightening, though the strong job gains give some room for more tightening without immediate fear of pushing up unemployment.
The job market is pushing onwards, despite a rising tide of recession fears. Even as the broader economy shows signs of slowing, the labor market remains a pillar of strength, holding up the economy. As tighter monetary policy bites, the labor market is likely to slow in the coming months, but for now, the labor market remains red hot, hopefully assuaging recession fears.
The labor market is shrugging off recession fears, with jobs growth rebounding to 528,000 after several months of running at a lower gear.
After about two-and-half years of the pandemic, payroll employment has returned to pre-COVID levels, a pace of jobs recovery that is truly remarkable given the depth of the recession we experienced.
Most industries added jobs in July, with job gains from sectors hard-hit by COVID like leisure & hospitality (+96,000) and education & health services (+122,000) and from sectors currently slowing like retail (+21,600), construction (+32,000) and information (+13,000).
With the surge in education & health services jobs in July, the remaining jobs shortfall by industry is mostly concentrated in leisure & hospitality and government, which have been slower to recover jobs.
Annual wage growth was flat at 5.2 percent in July, after cooling in prior months. This is in contrast to data from last week’s Employment Cost Index & the Atlanta Fed Wage Growth Tracker which continue to show accelerating wage gains.
The cooldown in wage growth is most evident for production & nonsupervisory workers in leisure & hospitality and transportation & warehousing: two sectors that had hot wage growth through much of 2021. Instead, wage growth appears to be spreading out to other industries.
The unemployment rate fell to 3.5 percent in July, hitting the pre-pandemic level from Feb 2020 which was itself tied with the lowest level since 1969.
The weak point in today’s jobs report was labor force participation, which fell to 62.1 percent down from 62.2 percent in June and 62.3 percent in July. This decline in labor force participation is a surprise given the tight labor market.
The decline in labor force participation was notably large for Black men, over 20 years old, for whom the labor force participation rate has plummeted from 68.9 percent in May to 67.3 percent in July.
Similarly, the Black unemployment rate rose to 6 percent in July, while the unemployment rate dropped for white, Hispanic or Latino, and Asian workers. This is a concerning trend to see start now if the labor market is headed for a slowdown, given that Black workers are often disproportionately impacted by economic slowdowns.
The unemployment rate for Hispanic or Latino workers hit a new record low in July, dropping to 3.9 percent. The asterisk on that milestone is that Hispanic or Latino labor force participation did drop modestly in July too.
Employee absences due to illness ticked up in July as the pandemic continues to affect workers. The ongoing impact of the pandemic may help explain the weakness in labor force participation over the last few months.
Surprisingly strong job gains in today’s jobs report combined with weakening job openings from the JOLTS report on Tuesday seems to be a point in favor of the Fed’s path to a soft landing. Ongoing job gains in the face of cooler labor demand hopefully makes a soft landing seem more plausible.