A Solid July Jobs Report Increases Potential for a Soft Landing
A Solid July Jobs Report Increases Potential for a Soft Landing
The July jobs report was yet another goldilocks report, showing both cooling and continued resilience in the labor market. The economy added 187K jobs, and the unemployment rate edged down to 3.5%. Worrying increases in last month’s report in the unemployment rate for Black workers and in the number of underemployed Americans working part-time for economic reasons partially reversed in July, increasingly the potential for a relatively pain-free return to normal.
The job-finding rate for unemployed workers rebounded to 31.2% after falling to 27.3% last month—good news for recently laid off workers and for new grads who are still looking for jobs.
Here are some highlights of the report:
The prime-age employment-to-population ratio continued to rise, reaching 80.9%—the highest since 2001. While overall labor force participation is still lower than before the pandemic due to the exodus of older workers, age-weighted participation is actually the highest ever.
Wage growth held firm at 4.4% over the year, but may not fuel further inflation, given strong recent labor productivity growth.
Average weekly hours edged down to 34.3, pointing to softening demand for labor. Given strong recent GDP growth, a shorter work week may partly reflect higher labor productivity.
Interest rate-sensitive industries continued to lag, feeling the bite of restrictive monetary policy. The information sector lost another 12 jobs, bringing the losses since November to 55K. Manufacturing lost 2K jobs and mining gained a mere 1K jobs.
The number of workers absent from work on vacation exceeded the number last July, and suggests that workers are almost back to pre-pandemic rates of travel and vacationing—good news for the still-recovering leisure and hospitality sector.
July youth employment almost matched last year’s high. Teens are being drawn into the workforce by attractive wages and perks in what remains a tight labor market.
Going forward, we expect to see the job market continue its graceful slowdown to a sustainable cruising altitude of around 100K-150K new payrolls a month. Restrictive monetary policy will make credit card loans, auto loans, mortgages, and small business loans harder to come by, constraining economic activity and hiring plans to some degree, particularly in tech and manufacturing.
At the same time, the recent 18% year-to-date increase in the stock market, 1.7% positive real wage growth over the year, strong GDP growth, and rising consumer and CEO confidence will be tailwinds driving continued strength in what will likely remain a job seekers’ market for the foreseeable future.
