July Jobs Report Strong; Unemployment Rate Falls

Total nonfarm payroll employment posted a strong increase for the second straight month, the Bureau of Labor Statistics reported Friday.

BLS said employment increased by 209,000 in July. The unemployment rate fell to 4.3 percent, matching its low from earlier this year. The number of unemployed persons, at 7.0 million, fell slightly.

BLS revised down total nonfarm payroll employment for May from +152,000 to +145,000 and revised June figures up from +222,000 to +231,000. With these revisions, employment gains in May and June combined were 2,000 more than previously reported. Over the past three months, job gains have averaged 195,000 per month.

The labor force participation rate, at 62.9 percent, changed little in July and has shown little movement on net over the past year. The employment-population ratio (60.2 percent) was also little changed in July but is up by 0.4 percentage point over the year.

John Silvia, senior economist with Wells Fargo Securities, Charlotte, N.C., said the jobs report was “consistent with economic growth.”

“Job gains are consistent with 2 percent plus economic growth, steady consumer spending and Fed policy as currently projected for a December rate hike,” Silvia said. “Hiring in the services sector remained solid, with gains in business services, education & health, finance and leisure and hospitality.”

Silvia noted persistent gains in jobs continue to outpace the growth in the labor force, thereby putting downward pressure on the unemployment rate and modest upward pressure on wages. “While job growth remains strong, earnings continue to struggle to break out of this mid-two percent pace,” he said. “The softer inflation readings and weak productivity numbers have limited the gains in nominal wage growth. On balance, average hourly and weekly earnings continue to improve and, along with more jobs, support the case for household income gains. Over the longer run, wages reflect the economic fundamentals of the labor market, and those fundamentals include productivity and inflation.”

Silvia added while labor force growth has picked up over the past year and is a healthy sign for continued economic growth, the current pace of labor force growth is not enough, without additional productivity gains, to kick up economic growth into the 3 percent range.

“Meanwhile, the labor force participation rate has remained fairly stable,” Silvia said. “In an odd turn of events, labor force participation in July is higher for less-than-high school and high school workers but down for some college and bachelor’s degree workers. Perhaps less-educated workers are being enticed into the labor force while more educated workers are less involved as gains in income and wealth have allowed a change in lifestyle.”

BLS reported the average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in July. In manufacturing, the workweek was also unchanged at 40.9 hours, and overtime remained at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was 33.7 hours for the fourth consecutive month.

The report said average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents to $26.36. Over the year, average hourly earnings have risen by 65 cents, or 2.5 percent. In July, average hourly earnings of private-sector production and nonsupervisory employees increased by 6 cents to $22.10.