July jobs report: booming jobs market, and a surge in participation continues to depress wage growth  

July jobs report: booming jobs market, and a surge in participation continues to depress wage growth

HEADLINES:

  • +157,000 jobs added
  • U3 unemployment rate down -0.1% from 4.0% to 3.9%
  • U6 underemployment rate down -0.3% from 7.8% to 7.5% (new expansion low)

Here are the headlines on wages and the broader measures of underemployment:

Wages and participation rates

  • Not in Labor Force, but Want a Job Now:  down -95,000 from 5.258 million to 5.163 million
  • Part time for economic reasons: down -176,000 from 4.743 million to 4.567 million (new expansion low)
  • Employment/population ratio ages 25-54: up 0.2% from 79.3% to 79.5% (new expansion high)
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: rose $.03 from  $22.62 to $22.65, up +2.7% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
Holding Trump accountable on manufacturing and mining jobs

 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?  

  • Manufacturing jobs rose +37,000 for an average of +29,000/month in the past year vs. the last seven years of Obama’s presidency in which an average of 10,300 manufacturing jobs were added each month.
  • Coal mining jobs were unchanged for an average of +100/month vs. the last seven years of Obama’s presidency in which an average of -300 jobs were lost each month

May was revised upward by +24,000. June was also revised upward by +35,000, for a net change of +59,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were positive.

  • the average manufacturing workweek was unchanged at 40.9 hours.  This is one of the 10 components of the LEI.
  • construction jobs increased by +19,000. YoY construction jobs are up +308,000.
  • temporary jobs increased by +27,900.
  • the number of people unemployed for 5 weeks or less decreased by -136,000 from 2,227,000 to 2,091,000.  The post-recession low was set two months ago at 2,034,000.

Other important coincident indicators help  us paint a more complete picture of the present:

    • Overtime was unchanged at 3.5 hours.
    • Professional and business employment (generally higher-paying jobs) increased by +51,000 and  is up +518,000 YoY.
  • the index of aggregate hours worked for non-managerial workers rose by 0.1%.
  •  the index of aggregate payrolls for non-managerial workers rose by 0.3%.
Other news included:
  • the  alternate jobs number contained  in the more volatile household survey increased by  +391,000  jobs.  This represents an increase of 2,454,000 jobs YoY vs. 2,400,000 in the establishment survey.
  • Government jobs decreased by -13,000.
  • the overall employment to population ratio for all ages 16 and up rose +0.1% from 60.4% m/m to 60.5% and is up 0.3% YoY.
  • The labor force participation rate was unchanged at 62.9%  and is also unchanged YoY
SUMMARY

The bottom line from this report is that employment is booming; wages still aren’t.

Although the headline number was average, the revisions to the last two months made them even more positive than the original great numbers. Meanwhile the prime age employment to population ratio, involuntary part time employment, and the underemployment rate all reached their best levels of this expansion. Based on the U6 number, we are probably only about 0.5% away from “full employment.”

Meanwhile, that big wage growth that was supposed to come because of that big tax cut for the wealthy and corporations last December?  Still hasn’t happened. Don’t hold your breath.

As I’ve written a number of times in the past year, an outsized jump in the rate of people entering the workforce — which was very much in evidence in the numbers this month, and YoY is up almost 1% — appears to be acting to depress wage growth in the short term.

As consumer spending was very good during the second quarter, we should continue to get good employment reports for a few more months. Once that abates (and it will), so will the very good employment reports.

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