Call this one a miss. After two solid months of job creation, the US economy slowed its employment expansion in July, adding only 157,000 jobs. The U-3 unemployment rate continued its gradual improvement by dropping a tenth of a point to 3.9%:
In July, the unemployment rate edged down by 0.1 percentage point to 3.9 percent, following an increase in June. The number of unemployed persons declined by 284,000 to 6.3 million in July. Both measures were down over the year, by 0.4 percentage point and 676,000, respectively. …
The labor force participation rate, at 62.9 percent in July, was unchanged over the month and over the year. The employment-population ratio, at 60.5 percent, was little changed in July but has increased by 0.3 percentage point over the year. (See table A-1.)
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in July, at 4.6 million, but was down by 669,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.
Market expectations for today’s report had been set at around 190,000, which still would have been slightly off the pace for the past two months. ADP projected an expansion of 219,000 in its report on Wednesday, part of a pattern of overshoots from the payroll-service giant. Other indicators of consumer spending and business investment had economists expecting something more significant too, especially since analysts at Challenger Gray & Christmas found that job cuts had hit their lowest level last month since November 2016.
The rate of expansion in July is basically a maintenance rate in relation to population expansion, not a significant addition but also not indicating any drag either. Its mediocrity is tempered by a boost in job additions for the previous two months in today’s revisions, which added 59,000 jobs to their previous totals. With those changes, the three-month average is still a healthy 224,000 jobs added per month.
As usual, though, we see some wide divergence between the Household and Establishment surveys. The Household survey shows the number of employed people increased by 389,000, although the number of those in the civilian labor force increased by only 105,000 and the population grew by only 201,000. However, re-entrants to the labor force (those who got jobs but hadn’t been counted in the labor force previously) dropped by 287,000 people, which … doesn’t make a lot of sense. Job-addition numbers come from the more-stable Establishment data.
That is also where we get compensation data, which was a somewhat mixed bag in July. Wages rose by nine cents an hour month-on-month or about 4% on an annualized basis, a bit better than the trend. However, weekly earnings edged down slightly, and aggregate hours worked dropped by two-tenths of an hour.
In short, we’ve seen better months, but we’ve seen a lot worse than this too. As CNBC’s Jeff Cox points out, this still makes the case for job-market strength, even if it’s not quite as good a case as a month ago:
Payroll growth turned sluggish in July after two robust months, though the unemployment rate edged lower and the overall jobs picture continued to look solid, according to Labor Department numbers released Friday.
Total nonfarm payrolls increased by 157,000 for the month, below the 190,000 expected in a Reuters survey of economists and the lowest gain since March. The unemployment rate fell one-tenth of a percentage point to 3.9 percent, as expected and is around its lowest level in nearly 50 years.
In the key wages category, average hourly earnings also met expectations, increasing 2.7 percent over the same period a year ago. The Federal Reserve is closely watching the wages component as it seeks to meet its 2 percent inflation target.
The AP’s Christopher Rugaber concludes that the trade wars don’t appear to have impacted the job market, at least so far:
One cloud on the horizon has been the Trump administration’s trade fights with China, the European Union, Canada and Mexico. The White House has slapped tariffs on steel and aluminum and on $34 billion of imports from China, and several companies have hit U.S. imports with retaliatory duties.
Yet the trade fights didn’t appear to impact hiring last month. Manufacturers, among the most directly affected by the import taxes, added 37,000 jobs, the most in seven months.
Oil and gas drillers nearly doubled their investment in drilling rigs and other structures this spring, helping manufacturers expand. That’s likely boosted factory output of steel pipe and other drilling equipment. The new spending follows a 60 percent jump in oil prices in the past year.
That is good news, although how long that will go without having an impact is a good question, too. The news from China this morning — about which more later — might make that question even more acute for August’s numbers.