August 05, 2022
The unemployment rate for Hispanics fell to a record low 3.9 percent in July.
The economy added 528,000 jobs in July. In addition, the gains for the prior two months were revised up by a total of 28,000, bringing the average over the last three months to 437,000. The number of jobs in the economy is now above its pre-pandemic level. It is likely to be revised still higher in the preliminary benchmark revisions that will be reported later this month.
In addition, the household survey showed the unemployment rate falling to 3.5 percent, tying a 50-year low. The survey showed a gain in employment of 179,000 after showing declines the prior three months. The U-6 measure of labor market slack remained at its all-time low of 6.7 percent, as the fall in unemployment offset a modest increase in the number of people involuntarily working part-time.
Wage Growth Accelerates to 5.0 Percent Annual Rate
The pace of growth in the average hourly wage had been slowing, but there was a big jump reported in July. The average hourly wage grew at a 5.0 percent annual rate comparing the last three months with the prior three months. This is still below the 6.1 percent annual rate seen at the end of 2021, but considerably faster than a pace consistent with the Fed’s 2.0 percent inflation target.
The fastest wage growth was in the lowest paying sector. Wages for hotel and restaurant workers rose at a 9.4 percent annual rate when comparing the last three months with the prior three. It seems that, contrary to most reporting, inflation has not been hitting those at the bottom hardest.
Job Gains Broadly Based Across Sectors
The July report showed a healthy pace of job gains in most sectors. In the goods sector, manufacturing added 30,000 and construction added 32,000, despite the slowdown in housing starts. Part of this story may be that with supply chain pressures being eased, contractors are better able to finish homes already started (there has been a huge gap between starts and completions), and also to do repairs and renovations on existing homes.
In the service sector, restaurants and health care were big job gainers, adding 74,100 and 69,600 jobs, respectively. The retail sector added 21,600 jobs. Hotels were an exception to the positive story, reportedly losing 200 jobs in July.
Hard-Hit Sectors Added Jobs
Some of the sectors that have had difficulty adding workers saw healthy gains in July. Local governments added 37,000 workers, with 27,400 of these being in education. This was the largest gain in the sector since a gain of 59,100 last July.
The childcare sector added 8,800 jobs in July after adding 11,500 in June. This is a gain of 2.1 percent in employment in the sector since July, although childcare employment is still down 8.4 percent from pre-pandemic levels.
Airlines Added 7,000 Jobs in July
The airline industry added 7,000 jobs in July, after adding 7,200 in June. Employment in the sector is now 9.1 percent above its pre-pandemic level.
Average Weekly Hours Are Stable at 34.6
Last year, the length of the average workweek increased from pre-pandemic levels, presumably because employers that had difficulty finding new workers had their existing workforce put in more hours. It has now been at 34.6 hours for four consecutive months, a level also reached before the pandemic. This presumably means employers are no longer finding it as difficult to hire workers.
Unemployment for Hispanics Hits Record Low
The unemployment rate for Hispanics fell 0.4 percentage points in July to 3.9 percent, the lowest on record. This fall was due to a reported 1.3 percentage point drop in the unemployment rate for Hispanic women, who saw their unemployment rate fall from 4.5 percent to 3.2 percent.
By contrast, the unemployment rate edged up by 0.2 percentage points for Black workers to 6.0 percent, which is 0.6 percentage points above the pre-pandemic low.
Share of Unemployment Due to Quits Edges Higher
The share of unemployment due to people voluntarily putting their jobs rose to 14.8 percent. This is high, reflecting a strong labor market, but below peaks of more than 15.0 percent hit in 2000, 2019, and earlier this year.
Long-Term Unemployment Fall Sharply
The share of long-term unemployed (more than 26 weeks) fell by 3.7 percentage points to 18.9 percent, a new low for the recovery. There was also a drop of 182,000 in the number of short-term unemployed (less than 5 weeks). This means that insofar as employers are increasing layoffs, the affected workers are having little difficulty getting new jobs.
Number of People Not in the Labor Force Due to COVID-19 Falls
The number of people who reported that they were neither working, nor looking for work, due to the pandemic, fell to 548,000 in July, with just over half (276,000), being prime-age (ages 25 to 54). These are people who say that they are not interested in working because they are ill, are caring for a sick family member, or are worried about being infected.
These numbers indicate that the pandemic is not a major factor keeping people out of the labor force at this point.
Labor Market Remains Strong
The July jobs report makes last week’s discussion of a recession look more than a bit silly. The jobs market remains very strong by any measure. In fact, there is zero evidence of any wave of layoffs increasing unemployment, as short-term unemployment is actually down somewhat from the June level.
The real issue is whether the labor market is too strong. Clearly this pace of job creation is not sustainable when the unemployment rate is already at a half century low. The pace of wage growth seems to have picked up some, with the average hourly earning series now corresponding to the Employment Cost Index data reported last week.
The good news is that all the reports about workers’ wages not keeping pace with inflation were mistaken. The bad news is that wages are growing at a pace that exceeds the Fed’s 2.0 percent inflation target.
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