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Employment Situation: Revisions Keep Trend Higher Despite Headline Miss

August 3, 2018

Bottom Line: While July's jobs gains were less than expected, the overall report showed continued moderate improvement in labor markets. The tally of teacher jobs, always volatile this time of year, fell, contributing to losses in both the private and public sectors that are likely temporary. Additionally, there were losses in the hobby and toy segment of retail that were likely one-time and related to a major bankruptcy. The household employment survey grew sharply, pushing the unemployment rate back down below 4%. Hourly earnings were a touch lower than expected and saw negative revisions -- however, on a trend basis there has been a slight acceleration in average hourly earnings with the last 3 months running at a faster pace of gains than the last 6- and 12-months. Overall, despite reports of labor shortages, job growth is accelerating modestly with wage gains that are still below cycle highs but accelerating slightly.

Payroll Employment rose by 157k in July, compared with market expectations for an increase of 193k. The prior 2 months were revised, higher in June by 35k and higher in May by 24k.

Government jobs FELL by 13k. Consequently, private sector jobs ROSE by 170k. Private education jobs fell by 11k. State and Local education jobs fell by -10k.

Overall employment is now 1.6% ABOVE its year ago level, Over the past 12 months, 2,400k jobs have been created.

In July, the job gains were in

  • Trade, Transportation & Utilities (+8k with 7k of those in Retail Trade),
  • Professional & Business Services (+51k with the addition of 27.9k in Temp Help Services),
  • Leisure & Hospitality (+40k),
  • Manufacturing (+37k),
  • Education & Health Services (+34k),
  • Construction (+19k), and
  • Financial Activities (-5k).
  • Jobs were shed in Financial Activities (-5k), and Government (-13k).

The Unemployment Rate FELL by 0.1 percentage points in July to 3.9%, compared with market expectations for a small decline to 3.9%.

Household employment rose by 389k while the labor force increased by 105k, resulting in a decrease in the number of unemployed of 284k.

The Labor Force Participation Rate was UNCHANGED at 62.9%. The Employment-Population Ratio ROSE by 0.1 percentage points to 60.5%.

The number of people Working Part-Time for Economic Reasons FELL by 180k to 4,482k. while Long-Term Unemployment FELL by 43k to 1,435k (accounting for 22.9% of the unemployed), while the Mean Duration of Unemployment ROSE by 2.0 weeks to 23.2 weeks.

There are now 6.3 million people officially unemployed. In addition, there are another 5,163k people who say they want a job but are not currently looking for one. Finally, another 4,482k people are working part-time because of slack economic conditions.

Hourly Earnings ROSE by 0.3% in July, below market expectations of 0.3%. Hourly earnings are now 2.7% ABOVE their year ago level.

Weekly Earnings FELL slightly, the result of the change in hourly earnings and a shorter workweek. Weekly earnings are now 3.0% ABOVE their year ago level.

The Average Workweek FELL by 0.1 to 34.5 hours, in line the market consensus at 34.5 hours.

Article by Contingent Macro Advisors