Friday, August 02, 2019

Comments on July Employment Report

by Calculated Risk on 8/02/2019 09:08:00 AM

The headline jobs number at 164 thousand for July was close to consensus expectations of 156 thousand, however the previous two months were revised down 41 thousand, combined. The unemployment rate increased to 3.7%. Overall this was a decent report. Note: Temporary Decennial Census hiring for July is not available yet (something to watch).

Earlier: July Employment Report: 164,000 Jobs Added, 3.7% Unemployment Rate

In July, the year-over-year employment change was 2.246 million jobs. That is decent year-over-year growth.

Average Hourly Earnings

Wage growth was at expectations. From the BLS:

"In July, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $27.98, following an 8-cent gain in June. Over the past 12 months, average hourly earnings have increased by 3.2 percent."
Wages CES, Nominal and RealThis graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 3.2% YoY in July.

Wage growth had been generally trending up, but has weakened recently.

Prime (25 to 54 Years Old) Participation

Employment Population Ratio, 25 to 54Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate decreased in July to 82.0% from 82.2% in June, and the 25 to 54 employment population ratio was decreased to 79.5% from 79.7%.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 363,000 in July to 4.0 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full- time jobs. Over the past 12 months, the number of involuntary part-time workers has declined by 604,000."
The number of persons working part time for economic reasons decreased in July to 3.984 million from 4.347 million in June.   The number of persons working part time for economic reason has been generally trending down, and this is the lowest level since 2006.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.0% in July. This is the lowest level for U-6 since 2000.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.166 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.414 million in June.

This is the lowest level since 2007.

Summary:

The headline jobs number was at expectations, however the previous two months were revised down.  The headline unemployment rate was unchanged at 3.7%. Wage growth was at expectations.

Some good news is the number of people working part time for economic reasons is at the lowest level since 2006, and the number of unemployed over 26 weeks is at the lowest level since 2007.

Overall this was a somewhat disappointing jobs report.   The economy added 1.156 million jobs through July 2019, down from 1.589 million jobs during the same period of 2018.   So job growth has slowed.