Despite the political turmoil in the nation’s capital, the United States’ labor market has added more than 1 million jobs since the start of the Trump Administration. This is roughly equivalent to the number of jobs created in the last six months of the Obama Administration.
July’s employment report was better than expected, with 209,000 jobs created and the unemployment rate falling back to a 16-year low of 4.3 percent. The strength of hiring is bringing more people off the sidelines and into the workforce, a reaction that can be seen in the increase in the labor force participation rate from 62.8 percent to 62.9 percent.
One demographic segment where this is apparent is with those individuals with less than a high school education, which saw their participation rate rise from 45.3 percent to 47.3 percent. The participation rate for all other educational segments declined. The one soft-spot in the report was annual wage growth, which again came in flat at 2.5 percent.
Following are the top takeaways from the report:
Employment growth remains robust: The U.S. economy added 209,000 nonfarm jobs in July, more than the roughly 178,000 many economists predicted. This was the 82nd straight month of job gains and proves the labor market is going strong. The job numbers for June were revised up from 222,000 to 231,000, and the numbers for May revised down from 152,000 to 145,000 – the revisions combined amount to 2,000 more jobs created than previously reported.
Unemployment remains low: The unemployment rate fell from 4.4 percent in June to 4.3 percent in July. The widely-watched measure of underemployment, which also includes those individuals who are marginally attached to the labor force, remained flat at 8.6 percent. The unemployment rate for those with less than a high school education rose from 6.4 percent to 6.9 percent, while those with a college degree stayed level at 2.4 percent. This is mainly due to more individuals with less than a high school education rejoining the labor force and looking for work. The large unemployment rate disparity between educational segments has been a feature since the Great Recession and is an important indicator to watch going forward.
Labor force participation rate rises, for some: The labor force participation rate, which includes all those who are employed and those who are unemployed but are willing to work, rose from 62.8 percent to 62.9 percent. This is a good sign and an indicator that the strength in the labor market is beginning to bring people off the sidelines in search of jobs. An interesting trend is the rise in the participation rate for those with less than a high school education, but a decline for all other educational segments. In addition, the participation rate for men over the age of 16 has fallen from 69.2 percent to 68.9 percent since July of last year, while the rate for women over 16 has risen from 56.8 percent to 57.3 percent over the same period.
Annual wage growth remains flat: Annual wage growth remained steady at 2.5 percent. While monthly wage growth was slightly better in July at 0.3 percent than in June at 0.2 percent, the lack of substantial growth has frustrated economists. As the labor market continues to grow and unemployment rates remain very low, wages should begin to rise. In this month’s Zions Bank Market Snapshot, we discuss some reasons for why wage growth has underperformed expectations.
Growth by Industry
- While not the largest gainer, the manufacturing sector added 16,000 jobs in July, which was significantly more than expected. This is one of the areas the President has continually spoke on both during the campaign and in office, and it seems to be improving. The sector has added 70,000 jobs since the start of 2017, which is a large improvement over the loss of 28,000 jobs the sector experienced over the same time last year.
- Professional and business services added 49,000 jobs since June, with most of the gain coming from administrative and support services. Interestingly, the second largest gainer in the sector was in employment services, which added 15,500 jobs. This seems to corroborate the notion that more people are entering the labor force and looking for work.
- The leisure and hospitality sector saw the largest total increase of 62,000 jobs, with much of the gain coming from the food and drinking places segment.
- Education and Health Services added 54,000 jobs, and has added 507,000 jobs over the past year. For the month, the largest gain in the sector was in health care at 39,4000 jobs.
- Retail trade continues to struggle, with clothing and accessory stores losing 10,000 jobs from last month. Since July of 2016, the retail trade sector has lost 7,000 jobs.
The bottom line: The United States labor market remains robust and a bright spot in the world economy. With 209,000 jobs added in July and a consistently low unemployment rate, many individuals looking for work should be able to find a job. While annual wage growth has been stubbornly stuck at around 2.5 percent, there is much to be pleased about. The July jobs report was a good signal that the U.S. economy continues its healthy growth path. It is important to remember one caveat about job creation related to the President. While Presidents can influence the direction of the economy, there are many factors at play that are much more impactful than any given administration.
The division of Economics and Public Policy at Zions Bank informs and educates employees, clients, and the community-at-large by providing insight and analysis on issues related to local, national and global economic trends as well as federal banking policies. The primary goal of the Economic and Public Policy team is to help individuals and businesses understand important issues that can impact their daily financial decisions. For more information and analysis, please visit www.zionsbank.com/economy.
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