Employment Report: Steady as She Goes

Total nonfarm payroll employment rose by 164,000 in July, while the unemployment rate held steady at 3.7 percent, the Bureau of Labor Statistics reported Friday.

The report cited “notable” job gains in professional and technical services, health care, social assistance and financial activities. The number of unemployed was little changed at 6.1 million.

BLS revised down employment for May by 10,000, from +72,000 to +62,000, and revised down June’s numbers by 31,000, from +224,000 to +193,000. With these revisions, employment gains in May and June combined were 41,000 less than previously reported. After revisions, job gains have averaged +140,000 per month over the past three months.

The report said the July labor force participation rate was 63.0 percent; the employment-population ratio was 60.7 percent.

Sarah House, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said the overall the labor market is holding up, even if the pace of improvement is slowing.

“Consumers are expected to do the heavy lifting for growth in the second half of the year as investment and trade are hampered by the ongoing trade war,” House said. “But the labor market is not the Fed’s primary concern at the moment. With wage growth showing few signs of sending inflation much above the current rate and trade-related uncertainty threatening to dent confidence, we still expect the FOMC will increase policy accommodation over the next few months.”

Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif., said given recent economic data, the payroll figures don’t suggest that a downturn is imminent.

“The consumer side of the economy looks healthy as job gains continue, prompting higher wages,” Kushi said. “However, there has been a hit to manufacturing from trade tensions, which has resulted in an economy that’s reliant on one engine to sustain the expansion, and that’s U.S. consumers.”

Kushi noted 70 percent of U.S. economic growth is driven by consumer spending and said the outlook for consumer economic strength remains strong, given that jobs are plentiful and wages are rising.

“In July, low mortgage rates of 3.8 percent and rising wages–which translates into higher household income–helped increase consumer house-buying power over the previous month,” Kushi said. “Furthermore, the recent rate cut by the Federal Reserve prompted the 10-year Treasury yield, which influences mortgage rates, to nearly three-year lows. Further decreases in mortgage rates could be on the way. Combined with the strength of the labor market, potential home buyers may see their house-buying power continue to grow in the months ahead.”

BLS said average hourly earnings for all employees on private nonfarm payrolls in July rose by 8 cents to $27.98, following an 8-cent gain in June. Over the past 12 months, average hourly earnings have increased by 3.2 percent. In July, average hourly earnings of private-sector production and nonsupervisory employees rose by 4 cents to $23.46.

The report said the average workweek for all employees on private nonfarm payrolls decreased by 0.1 hour to 34.3 hours in July. In manufacturing, the average workweek decreased by 0.3 hour to 40.4 hours, and overtime declined by 0.2 hour to 3.2 hours. The average workweek of private-sector production and nonsupervisory employees declined by 0.1 hour to 33.5 hours.