Delta Defiance: America Created 943,000 Jobs in July

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The U.S. economy added 943,000 jobs in July and the unemployment rate dropped to 5.4 percent, the Labor Department said in its monthly labor assessment Friday.

The median forecast of analysts was for 845,000 jobs and an unemployment rate of 5.7 percent, according to Marketwatch. The private payrolls report from payroll processor ADP on Wednesday, however, pointed to a much weaker number, with ADP estimating just 330,000 jobs.

July figures follow the initial report of 850,000 jobs unemployment for June, which was above consensus, and an unemployment rate of 5.7 percent, which was below consensus. That June report was revised up on Friday to 938,000 jobs. Jobs figures fell short of expectations in April and May.  May’s report was revised up by 31,000 to 614,000. The combined effect of the revisions is to raise estimated employment gains for June and May by 119,000.

The larger picture is that the labor market has been considerably stronger than thought over the past three months.

One note of caution: the estimate of jobs is based on data from a mid-month work week that occurred when the level of new infections was considerably lower than it is now. That could mean that the survey overestimated the number of jobs created by not accounting for a slowdown in the second half of the month.

Private payrolls grew by 703,000, slightly below expectations for around 750,000. Last month’s private-sector job growth was revised up from 662,000 to 769,000. The public sector added more jobs than expected, led higher by education jobs coming back.

Those initial reports were taken as evidence to the claim that hiring is being held back by enhanced unemployment benefits, prompting Republican governors to bring those programs to an early end in around 25 states. The better than expected jobs report may be an indication that these efforts have helped spur people back into work.

The economy outperformed expectations on many metrics in the first two quarters of this year as vaccinations boosted business and consumer confidence and restrictions on businesses were been lifted. But the surge in Covid-19 infections and inflation this summer have coincided with a series of disappointing economic reports that appear to indicate economic growth has already peaked and is now slowing.

Leisure and hospitality jobs grew by 380,000, the fourth consecutive month of gains near or above 300,000. Two-thirds of those gains—253,000—were in food services and drinking places. Employment also continued to increase in accommodation and in arts, entertainment, and recreation. Despite recent growth, employment in leisure and hospitality is down by 1.7 million, or
10.3 percent, from its level in February 2020.

Employment in manufacturing rose by 27,000 in July, largely in durable goods manufacturing. Within durable goods, job gains occurred in machinery and miscellaneous durable goods manufacturing. Manufacturing employment is 433,000 below its February 2020 level.

Despite the gains in July, the labor force participation rate was little changed at 61.7 percent in July, just one-tenth of a point higher than June, and has remained within a narrow range of 61.4 percent to 61.7 percent since June 2020. This may be an indication that work-free income from the government—enhanced jobless claims, stimulus checks, and the new child tax credits—continue to keep people from rejoining the workforce. Another factor keeping people out of work has been the lack of child care options, a situation which may resolve itself in the coming months if schools fully reopen. The participation rate is 1.6 percentage points lower than in February 2020.

The employment-population ratio increased by 0.4 percentage point to 58.4 percent in July and is up by 1.0 percentage point since December 2020. However, this measure is 2.7 percentage points below its February 2020 level.

Average hourly earnings rose by more than expected, climbing 0.4 percent from the prior month and four percent from a year ago. The average hourly work week was unchanged from June’s upwardly revised 34.8 hours, a tick above the initial June report of 34.7 hours.

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