U.S. Employment Growth Disappoints in July; Earnings Gain Steadies & Unemployment Rate Slips

Nonfarm payrolls increased 187,000 during July (2.1% y/y) after rising 185,000 in June, revised from 209,000, and 281,000 in May, revised from 306,000. These latest two increases were the smallest since a decline in December 2020. Expectations had been for a 200,000 rise in the Action Economics Forecast Survey.

Average hourly earnings increased 0.4% in July after the same increase in June. The May rise was revised to 0.3% from 0.4%. The 4.4% y/y earnings increase remains below a high of 5.9% y/y in March 2022. A 0.3% July increase had been expected.

The unemployment rate, measured in the household survey, eased to 3.5% in July from 3.6% in June. It was the lowest rate in three months after increasing to 3.7% in May. Expectations had been for 3.6%. Household employment increased 268,000 after rising 273,000 in June. The labor force rose 152,000 following a 133,000 rise. The overall unemployment rate, including workers who were marginally attached & working part-time for economic reasons, fell to 6.7% from 6.9% in June.

In the establishment survey, private-sector employment rose 172,000 in July (2.1% y/y) after a 128,000 June increase. Factory sector jobs declined 2,000 (+0.9% y/y) after rising 6,000 during June. Construction sector employment rose 19,000 (2.5% y/y) after a 26,000 June increase.

Private service-producing employment posted 154,000 increase in July (2.2% y/y) after Improving 97,000 in June. Industry performance was mixed. To the upside, education & health care jobs gained 100,000 (4.1% y/y). The number of leisure & hospitality jobs rose 17,000 (3.9% y/y) while financial activities employment rose 19,000 (1.1% y/y). Trade, transportation & utilities employment rose 18,000 (0.6% y/y) but information sector payrolls fell 12,000 (-1.1% y/y). Professional & business services employment weakened 8,000 (+1.6% y/y) including a 22,100 decline (-2.2% y/y) in temporary help employment.

Government sector payrolls rose 15,000 last month (2.4% y/y) after increasing 57,000 in June. Local government jobs increased 19,000 (2.3% y/y). Federal government jobs rose 7,000 (2.2% y/y) but state government employment fell 11,000 (+ 2.7% y/y) in July.

Private-sector average hourly earnings rose 0.4% in July. Earnings in the goods-producing sector improved 0.6% (5.3% y/y). Earnings in construction rose 0.9% (5.4% y/y), while factory sector earnings strengthened 0.5% (5.1% y/y). In the private services sector, earnings rose 0.4%. The y/y increase of 4.1% is reduced from a high of 6.1% in March 2022. Financial activities earnings rose 0.4% (4.4% y/y). Trade, transportation & utilities sector pay increased 0.2% (4.7% y/y) last month. Professional & business sector earnings rose 0.5% (4.6% y/y). Private education and health services pay increased 0.3% (2.9%y/y). Leisure & hospitality earnings gained 0.3% (5.6% y/y), well below the 14.0% y/y December 2021 peak. Information sector pay rose 0.4 % (3.8% y/y) in July.

The length of the average workweek edged lower to 34.3 hours in July, down from a peak of 35.0 hours in January 2021. The workweek in the goods-producing sector stood at 39.8 hours for the fourth straight month. The construction sector average workweek held at 38.9 hours, while the factory sector workweek remained at 40.1 hours for the fourth straight month. The average workweek in the private service sector was 33.3 hours for a fifth consecutive month, but remained below the 34.0 hour high early in 2021. Financial sector hours edged up to 37.5 and information services hours remained at 36.3. Professional & business service hours held at 36.5 hours, but were down from a January 2021 high of 36.9, while leisure & hospitality hours eased to 25.3 in July.

The private sector aggregate weekly hours index, a key indicator of production and income, fell 0.2% (+1.3% y/y) following a 0.4% June increase.

The household survey showed a dip in the jobless rate to 3.5% in July and was accompanied by a steady 62.6% labor force participation rate, where it’s been for five straight months. The participation rate for teenagers fell to 35.7% and remained sharply below a November high of 37.8%. For workers aged 20-24, the rate fell to 70.6% and compared to 72.0% in February & March. For workers aged 25-54, the rate eased to 83.4% from 83.5%, which was the highest level since May 2002. For individuals 55 and over, the rate improved to 38.6% in July, but remained well below its 40.5% peak in July 2019.

The employment/population ratio for all workers improved in July to 60.4%. It remained below its reading of 61.1% in February 2020 just prior to the pandemic.

The average duration of unemployment eased in July to 20.6 weeks from 20.7 weeks in the prior month, remaining below a 32.0 week high in June of 2021. The median duration of unemployment held at 8.7 weeks and remained below its 19.9 high in June 2021.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.