Employment update for July

“Nonfarm payroll employment increased by 162,000 in July, and the unemployment rate edged down to 7.4 percent. Over the prior 12-month period, job gains averaged 189,000 per month. In July, employment rose in retail trade, food services, financial activities, and wholesale trade. Average hourly earnings of all employees on private nonfarm payrolls edged down by 2 cents in July, following an increase of 10 cents in June. Over the past 12 months, average hourly earnings have risen by 44 cents, or 1.9 percent. In comparison, the Consumer Price Index for All Urban Consumers (CPI-U) rose by 1.8 percent from June 2012 to June 2013.

The unemployment rate edged down to 7.4 percent in July. The jobless rate is down from 8.2 percent a year ago. There were 11.5 million people unemployed in July, a decline of 1.2 million from a year earlier.    

The labor force participation rate, at 63.4 percent, was little changed in July and has shown little movement, on net, thus far this year. Since the end of the recent recession, labor force participation generally has been on a downward trend. Among the employed, there were 8.2 million involuntary part-time workers in July, essentially unchanged over the month and over the year.    

Among people neither working nor looking for work in July, 2.4 million were considered marginally attached to the labor force, little changed from a year earlier. The marginally attached are those who had not looked for work in the 4 weeks prior to survey, but they wanted and were available for work, and had looked for a job within the last 12 months. Of the marginally attached, 988,000 were classified as discouraged workers in July, up from 852,000 in July 2012. Discouraged workers are those who stopped searching for work because they believed no jobs were available for them.”

The discouraging thing about the total number of jobs created in July, 162,000, is that 158,000 were service jobs and only 4,000 were goods producing. Manufacturing gained 6,000 jobs, construction lost 6,000 jobs. Government added 1,000 jobs. Table 1 shows this detail and more.

Manufacturing employment has grown only 0.2 percent in the last year as the number employed in construction has grown by 3 percent. Presumably service jobs on average pay significantly less than those in the goods producing sector and, in addition, much has been written lately about many of these service jobs being part time. The BLS publishes date sub-divided into full time employment, > 35 hours per week and part time < 35 hours per week. Unfortunately due to the difficulty in making this split, the total of full time and part time do not add up the total employed. To try to make sense of this we employed a 12 month rolling average of job creation in the two sectors, Figure 1. This clearly shows the shift to part time from full time during the recession but does not show the shift towards part time that has been reported recently. Stay tuned for any future changes as employee health care mandates begin to take effect.

Figure 2 shows the civilian participation rate since 1990 and through July. The trend is well established and is the dark side of the headline number of total jobs created.   

Some good news in July was that in spite of federal government spending cuts under sequestration and higher personal and payroll taxes since the beginning of the year, monthly job cuts remain very low, averaging just above 40,000 for the last 12 months. This compares to the average of about 60,000 prior to the recession.