U.S. employers created more jobs than expected last month, with payroll gains accompanied by improved economic activity and consumer mobility during the recovery. The unemployment rate also fell to its lowest level since March 2020, improving more than expected.
The US Department of Labor released its July employment report on Friday morning at 8:30 a.m. ET. Here are the report’s key metrics, compared to consensus estimates compiled by Bloomberg:
Change in the non-agricultural wage bill: +943,000 against +865,000 expected and a +938,000 revised in June
Unemployment rate: 5.4% against 5.7% expected and 5.9% in June
Average hourly wage, month to month: 0.4% against 0.3% expected and 0.3% in June
Average hourly wage, year-on-year: 4.0% against 3.9% expected and 3.6% in June
At 943,000, the wage bill increased the most since August 2020. Employment growth was also revised up for May, reaching 614,000 from 583,000 previously, and for June, with an upward revision to 938,000 against 850,000.
The economy, however, is still trying to recoup the millions of jobs lost since the start of the pandemic. On the net, the economy has lost 5.7 million employees since March of last year, with much of that deficit still present in the leisure and hospitality sectors. These employers have cut a total of nearly 2 million jobs since the pandemic first resulted in closures across the United States
Employers in the leisure and hospitality sector were once again the first to bring back jobs last month, with payrolls increasing 380,000 to more than a third of total job gains in July. In the private sector, employment in education and health services also contributed significantly, with an increase in the wage bill of nearly 90,000 people.
A major contributor to the July payroll report also came from government jobs, particularly in education. Overall, the government’s payroll increased by 240,000 last month. However, these increases may overestimate the magnitude of real employment growth in the sector, given the seasonal adjustment issues caused by the pandemic.
“Fluctuations in education staff due to the pandemic have distorted normal seasonal patterns of accumulation and layoff, likely contributing to job gains in July,” the Labor Department said in its report on Friday. “Without the typical increases in seasonal employment earlier, there were fewer layoffs at the end of the school year, which resulted in job gains after seasonal adjustment. These variations make it more difficult to discern current employment trends in these education industries. ”
Since the June jobs report, the Delta variant has swept the country, heightening concerns among many workers about infection in the workplace. In addition, difficulties in finding child care services over the summer and continued support for improved federal unemployment benefits persisted, generating a confluence of factors that may have held more people in need of help. labor market gap. Yet these factors were not enough to offset the current momentum across the economy this summer.
Yet for the economy, bringing back enough workers to meet growing consumer demand has become a major issue weighing on the overall pace of growth. Job shortages have hit both the manufacturing and service sectors, with many employers raising wages to compete for workers. As a result, the average hourly wage rose a further 0.4% month-on-month and accelerated more than expected to reach a pace of 4.0% year-on-year in July.
Ahead of Friday’s report, other labor market data was mixed. Encouragingly, the Institute for Supply Management’s July indexes for manufacturing and services both showed job growth had returned to expansionary territory after contracting in June. Initial weekly jobless claims were choppy, but largely continued on a downtrend this summer. However, ADP’s monthly salary report released on Wednesday was a big disappointment on the downside, with private salaries rising only 330,000 from the consensus estimate of 690,000.
For investors, however, a slight moderation in job growth could be seen as a positive potential for markets, if it deters central bank officials from abandoning their very accommodative monetary policies in the short term. Federal Reserve Governor Christopher Waller said earlier this week that he would support the announcement of a cut in crisis-time central bank bond purchases by September if the next report on l job was solid. Likewise, Federal Reserve Vice Chairman Richard Clarida has said he will support an interest rate hike in 2023 if the economic recovery continues on its current path.
“If the ADP is to be believed and job growth has slowed further, that would support the doves who seem to want to wait until early next year to start the reduction,” wrote Paul Ashworth, Chief US Economist for Capital Economics, in a Note. “The July report, due this Friday, is particularly important because it is the latest employment data the Fed will have before the Jackson Hole Symposium later this month.”
The Fed will discuss its policy at its annual Jackson Hole symposium scheduled for August 26-28.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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