This Friday, the Bureau of Labor Statistics (BLS) will release the July jobs report. The resilient job market has continued to boost optimism for a soft landing as inflation slows. The job market has managed to avoid any potholes as it slowly decelerates and July’s jobs report is likely to show a job market that is healthy and closing in on a balanced state.
Here are three trends we'll be watching for in the July jobs report:
- Jobs growth likely flat. Employers added 209,000 jobs in June, a healthy clip but the slowest pace since December 2020. The job market has been surprisingly resilient despite recession fears and Friday’s jobs report is likely to reaffirm that with 200,000 jobs added in July.
- Unemployment rate flat. The unemployment rate is likely to remain unchanged in July at 3.6 percent up from the historic lows set in the spring, but still low. The attention should be on prime-age labor force participation to see if the hot job market can continue to pull in more Americans to the workforce, sustaining jobs growth while tamping down inflationary pressures.
- Wage growth likely to fall to 4.3 percent. Year-over-year growth in average hourly earnings is likely to decelerate modestly from 4.4 percent in June to 4.3 percent in July. Gradual cooling in wage growth is slowly bringing it closer to a level consistent with the Federal Reserve’s 2 percent inflation target.
Special Topic: Summer of Strikes
The recent strikes and labor negotiations point to a unique economic moment for workers. Despite strong wage growth and a resilient job market, inflation is eating into workers’ paychecks. Anxiety about household budgets is pushing workers to demand larger raises at the same time that the surprisingly resilient labor market is also pulling employers to the negotiating table. The push-and-pull of the economic forces is creating a uniquely attractive time for unions to negotiate on behalf of their members.
Conversely, unions are actually playing catch up as wage gains for nonunion workers have outpaced those for union members since the second half of 2021. But crucially, unions are also looking to lock in wage gains to protect union members if the downturn does come. While contract raises for union members don’t always keep up in hot job markets, they can act as insurance against downturns, guaranteeing wage gains for members when the economy weakens.
Specifically, the UPS agreement mitigates the threat of a significant disruption to transportation and delivery networks. The agreement to increase wages for UPS workers is a reflection of how quickly wages have grown in the transportation & warehousing industry over the last few years. In 2023, the hot job market has quickly changed the definition of a competitive wage in the industry. According to Glassdoor data, in 2019, 31 percent of hourly workers in transportation & warehousing were making below $15/hour, but now in 2023, only 4 percent of workers are earning a wage rate below $15/hour.
However, we also have seen wage growth has slowed down significantly in 2023 for these workers. In Glassdoor data, the average wage for hourly workers in the transportation & warehousing sector is $21.74 per hour in 2023 YTD, 4.1 percent higher than the $20.88 per hour average in 2022, which is a significant slowdown from the 7.9 percent wage gains we saw in 2022.
Overall, the UPS agreement helps avert a more significant disruption to supply chains after three years of turmoil, but the agreement is also a signal of the economic forces incentivizing labor negotiations as unions seek to secure wage gains in the face of inflation and employers grapple with a still-tight labor market.
Methodology
The second and third charts use self-reported wage data from Glassdoor from hourly full-time workers in the transportation & warehousing sector. For the histogram in the second chart, hourly wages are binned into left-inclusive dollar bins; for example, self-reported hourly wage rates of $10.00, $10.25, $10.99 would be grouped together under “$10.00.” For the third chart, hourly wages are averaged over the whole year and percentage growth is calculated between these annual averages. Glassdoor wage data for 2023 includes data through July 25, 2023 while BLS earnings data includes data up through June 2023. Data is not seasonally adjusted.