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 Lead Economist Daniel Zhao
Today’s jobs report extends a string of economic data pointing to a soft landing. Employers added 187,000 jobs to payrolls in July and the unemployment rate ticked down to 3.5 percent, both close to expectations. A string of hot economic data had raised a question about whether the economy was even reflating, but today’s report reaffirms overall that the job market is still on a glide path to a soft landing.
Payroll Employment Grew Modestly
Payroll employment grew by 187,000 in July, slightly below expectations and mostly unchanged from the 185,000 jobs added in June.
While payroll gains have slowed significantly over the course of the year from the monthly average of roughly 399,000 jobs added in 2022, they’re still coming in at a healthy clip, beating the 2019 average of about 163,000 monthly jobs added.
Job gains were concentrated in health care & social assistance (+87,100 jobs added), accounting for almost half of July’s private payroll gains. Construction (+19,000) continues to add jobs despite being a traditionally rate-sensitive sector.
Unemployment Rate Falls Further
The unemployment rate ticked down in July to 3.5 percent from 3.6 percent. The low unemployment rate was paired with an unchanged labor force participation rate and prime-age employment-population ratio. The prime-age employment-population ratio is at 80.9 percent, tied with June and at its highest level since 2001, but is still 1.0 percentage points below its record high of 81.9 percent set in April 2000. If the ratio were to increase to the previous record high, that would add another 1.2 million workers into employment.
Wage Growth Largely Unchanged
Wage growth was largely unchanged at 4.4 percent in July from 4.4 percent in June. While wage growth may not yet be low enough to convince the Federal Reserve that the labor market is in balance, the continued deceleration in wage growth and inflation amid a firm labor market is an encouraging sign that we’re still on track for a soft landing.
Conclusion
After months of hand wringing about recession risks, today’s report shows a job market that continues to slow in an orderly fashion. The gradual deceleration affirmed by today’s jobs report allows the job market to be on a slow but steady path towards a soft landing.
More Insights
Payroll gains came in at 187,000 in July, essentially unchanged from the downwardly revised 185,000 jobs added in June. While this is slower than the roughly 399,000 monthly average from 2022, it's still a healthy clip, beating the 2019 average of roughly 163,000/month.
Jobs growth in July was largely driven by health care & social assistance which added 87,100 jobs, about half of the private payroll gains in July. Construction also keeps adding jobs though residential construction lost 5,500 jobs while nonresidential construction gained 10,500.
Professional & business services was down 8,000 jobs in July, in large part due to employment services (-34,400) as businesses pull back on temp hiring. Professional, scientific & technical services (which includes some tech subindustries) gained 24,100.
Similarly, information lost 12,000 jobs in large part due to the entertainment & publishing subindustries while the tech subindustries fared a little better and were more flat.
Wage growth was largely unchanged on an annual basis at 4.4 percent in July, though on a 3-month annualized basis, there has been an uptick in recent months. The Federal Reserve may point to firming 3-month annualized wage growth as evidence of a still-too-hot labor market; however, in the context of slowing jobs growth and falling average weekly hours, the job market is still cooling.
Case in point: average weekly hours fell to 34.3 hours in July, continuing their downward trend over the last few years.
The unemployment rate dropped back to 3.5 percent, continuing a surprisingly consistent run of the unemployment rate staying put in the historically low 3.4–3.6 percent range since March 2022.
After a few months of rising Black unemployment, there was a modest downtick to 5.8 percent in July from 6.0 percent in June. The unemployment rates by race/ethnicity can be volatile on a month-to-month basis so more data will be needed, but it does suggest that perhaps the drop in Black unemployment in spring 2023 was more of a data blip rather than the start of a new trend.
The prime-age employment-population ratio was flat at 80.9 percent in July, tied with June which was also the highest rate since April 2001. The record for this measure was 81.9 percent in 2000; getting to that level would mean another 1.2–1.3 million workers in jobs.
Permanent layoffs fell in July to 23.5 percent of the unemployed, down from the peak of 26.6 percent in March. This aligns with other data that there was a real wave of layoffs in early-2023 (with many headlines coming from tech), but thankfully, that wave seems to have receded.
