Employment: Stronger Job Gains, More Participation, More Hours

Bottom Line:  Payroll employment rose more than expected, and there were upward revisions to prior hiring totals.  The household survey showed even stronger gains, just over 1 million new jobs, pushing the unemployment rate lower as labor force participation edged higher.  Aggregate hours rose and earnings were higher.  While we should caveat that these data were collected before new mask mandates in some regions, this was one of the best jobs reports since early in the pandemic recovery.Leisure and hospitality jobs led the gains. Usually, job gains in that lower-paying sector bring the average hourly earnings lower, but wages surprised to the upside as employers increased wages to lure workers back. Moreover, most indications point to improving trends with three-month average hourly earnings running at 5% annualized, above the 4.2% and 4.0% pace of the last six- and twelve months.The government sector offered the biggest upside surprise in payroll gains, mostly driven by public school jobs.  This remains an important sector for the overall recovery, as hiring here suggests a return to normal school schedules, potentially enabling many parents to re-enter the labor force.  That said, skeptics might note that the seasonal adjustment factors fail to capture the fact that many schools are starting earlier and that we could see lower seasonally adjusted readings in August and September.Overall, this was a remarkably strong jobs report hitting all the key metrics with improving hiring, higher wages, and increased labor force participation.  Moreover, the medium-term trends have been moving in the right direction for several months.Payroll Employment rose by 943k in July, compared with market expectations for an increase of 870k. The prior 2 months were revised, higher in June by 88k and higher in May by 31k.

Government jobs ROSE by 240k. Consequently, private sector jobs ROSE by 703k.  Private education jobs rose by 40k. State and Local education jobs rose by 231k.Overall employment is now 5.2% ABOVE its year-ago level,  Over the past 12 months, 7,255k jobs have been created.In July, the job gains were in

The Unemployment Rate FELL by 0.5 percentage points in July to 5.4%, compared with market expectations for a small decline to 5.7%.  Household employment rose by 1043k while the labor force increased by 261k, resulting in a decrease in the number of unemployed of 782k.The Labor Force Participation Rate ROSE by 0.1 percentage points to 61.7%.

The Employment-Population Ratio ROSE by  0.4 percentage points to 58.4%.The number of people Working Part-Time for Economic Reasons FELL by 193k to 4,351k. while Long-Term Unemployment FELL by 560k to 3,425k (accounting for 39.4% of the unemployed),  while the Mean Duration of Unemployment FELL by 2.1 weeks to 29.5 weeks.There are now 8.7 million people officially unemployed. In addition, there are another 6,517k people who say they want a job but are not currently looking for one.  Finally, another 4,351k people are working part-time because of slack economic conditions.The Index of Aggregate Hours ROSE by 0.6%, combining the solid gain in private payroll employment and the steady workweek. Hourly Earnings ROSE by 0.4% in July, above market expectations of 0.3%.Hourly earnings are now 4.0% ABOVE their year-ago level.

Weekly Earnings also ROSE by 0.4%, the result of the change in hourly earnings and a steady workweek. Weekly earnings are now 4.6% ABOVE their year-ago level.

The Average Workweek was UNCHANGED at 34.8 hours, ABOVE the market consensus at 34.7 hours.