A Good Report, but Below Expectations
• Payroll Employment increased by 157,000 jobs in July, with positive revisions to previous months.
• The Unemployment Rate for July fell back to 3.9 percent.
• Average Hourly Earnings increased by 0.3 percent in July.
• The Average Workweek in July eased to 34.5 hours.
The headline number for July payroll job growth, +157,000, was a little below expectations, but the overall jobs report was certainly not bad. Earlier this week the ADP Jobs Report showed a gain of 219,000 private sector jobs, and that increased expectations for this morning’s headline number. The good news in today’s official Bureau of Labor Statistics job count was the positive revision of 59,000 more jobs over May and June. If we add the revision for May and June to the July total gain, that puts us up 216,000 jobs from last month’s estimate. The U.S. unemployment rate ticked back down to 3.9 percent in July, after increasing to 4.0 percent last month. We view the June increase in the unemployment rate as anomalous, so the dip in the July unemployment rate just puts us back in the appropriate range for this economy. Average hourly earnings were up 0.3 percent for the month, warm but not hot. Over the last year, average hourly earnings were up 2.7 percent. The Consumer Price Index increased by 2.8 percent over the twelve months ending in June, so most workers are not seeing real gains. The average workweek decreased by 0.1 hours to 34.5. The moderate, but less-than-expected, gain in July payrolls would be a win at any point in the business cycle. It should not deter the Federal Reserve from executing their expected fed funds rate hike on September 26. The Fed will see one more jobs report, for August, before the next FOMC meeting.
Mining and logging industries shed 4,000 jobs in July. Construction paved the way for 19,000 net new jobs. Manufacturing industries built 37,000 net new jobs, a strong monthly gain. Wholesale trade gained 12,300 new jobs in July. Retail trade added 7,100. Employment in transportation and warehousing eased by 1,300 jobs, including a nearly 15,000 job loss for transit and ground passenger transportation. Information industries held their employment unchanged for the month. Financial services gave up 5,000 jobs on net. Professional and business services employment was up a solid 51,000. Education and healthcare added 22,000 workers. Leisure and hospitality served up 40,000 new jobs. The government sector dropped 13,000 jobs in July. Seasonal adjustment factors for local government can get squirrelly this time of year.
Market Reaction: U.S. equity markets opened with gains. The 10-Year T-bond yield is down to 2.97 percent. NYMEX crude oil is down to $68.87/barrel. Natural gas futures are up to $2.85/mmbtu.
For a PDF version of this report, click here: July 2018 U.S. Employment
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