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Economy in Brief

U.S. Payrolls Strengthen & Jobless Rate Declines in July
by Tom Moeller  August 6, 2021

• Service-sector job gain led by leisure & hospitality.

• Average hourly earnings growth is unexpectedly strong.

• Unemployment rate declines sharply.

Nonfarm payroll employment increased 943,000 (5.3% y/y) during July. It was the largest increase since August of last year. An 801,000 rise had been expected in the Action Economics Forecast Survey. This gain was accompanied by an upward revision to the June increase to 938,000 from 850,000. The May gain also was raised to 614,000 from 583,000.

Average hourly earnings rose 0.4% last month (4.0% y/y) following a 0.4% June rise, revised from 0.3%. A 0.3% increase had been expected.

The unemployment rate declined from 5.9% in June to 5.4% in July, compared to expectations for a drop to 5.7%. The labor force rose 261,000 after increasing 151,000 in June. At the same time, employment in the household survey surged 1.043 million after declining 18,000. The overall unemployment rate, including those who were marginally attached or working part-time for economic reasons, fell to 9.2% from 9.8%. It was the lowest level since March of last year.

The 943,000 increase in payroll jobs last month was paced by a 380,000 gain (18.5% y/y) in leisure & hospitality which followed a 394,000 June increase. An 87,000 July gain (3.2% y/y) in education & health services came after a 60,000 increase. The 47,000 rise (4.4% y/y) in trade, transportation & utilities jobs included a 5,500 decline (+4.0% y/y) in retail trade employment. Professional & business services jobs gained 60,000 (6.2% y/y) after a 75,000 strengthening. Within that category, temporary help jobs rose 9,700 (18.8% y/y) following a 35,000 jump. Financial sector employment rose 22,000 (2.0% y/y) and recouped a 1,000 June decline. Information services jobs rose 24,000 (5.9% y/y) following a 4,000 rise and financial sector employment improved 22,000 last month (2.0% y/y) after easing 1,000 in June.

Factory sector employment rose 27,000 last month (2.8% y/y) following a 39,000 increase in June and a 36,000 May rise. Construction sector payrolls improved 11,000 (2.9% y/y) following three consecutive months of decline. Employment in the mining & logging industry rose 6,000 (7.2% y/y) on the heels of an 11,000 increase.

Government sector employment surged 240,000 last month (2.3% y/y) after increasing 169,000 in June. A 230,000 increase (3.6% y/y) in local payrolls included a 220,700 rise (4.9% y/y) in education services. The number of state government jobs fell 8,000 (+0.7% y/y), including a 9,900 improvement (3.8% y/y) in teachers' jobs. Federal government employment rose 18,000 (-0.7% y/y) after declining in each of the prior two months.

Average hourly earnings strengthened 0.4%. Earnings in the leisure & hospitality sector jumped 0.9% (9.6% y/y), the sixth straight month of strong increase. Professional & business service sector pay rose 0.5% (4.8% y/y) while education & health sector earnings gained 0.4% (4.2% y/y). Factory sector pay improved 0.5% (3.3% y/y) after a 0.3% rise. Construction sector earnings gained 0.2% (3.7% y/y) after rising 0.3%. Information sector earnings were unchanged (0.4% y/y).

The length of the average workweek held steady at an upwardly revised 34.8 hours. The financial sector workweek held at 37.6 hours for the fourth straight month but the information sector workweek edged higher to 37.3 hours, up from 36.3 hours one year ago. Hours worked in the professional & business service sector held at 36.7 also for the fourth straight month. The education & health services workweek held steady at 33.3 hours but the leisure & hospitality workweek improved to 26.6 hours. The factory sector workweek rose to 40.5 hours, the longest workweek in four months. The construction workweek rebounded to 38.9 hours after falling sharply to 38.6 hours in the prior month.

From the household employment survey, the lower 5.4% unemployment rate in July occurred as the labor force participation rate edged up to 61.7% but remained below the 63.4% high in January of last year. The teenage participation rate rose modestly to 36.1% from 35.4%, but for individuals aged 20-24 it eased to 70.5% from 70.8%. For workers aged 25-54, the rate rose to 81.8%, but remained below the January 2020 high of 83.0%. For men aged 25-54, the rate increased to 88.3%, the highest level since March of last year. For women of that age, the participation rate rose to 75.5%, also the highest since March of 2020. For workers aged 55 & over, the participation rate held steady at 38.4% and remained below the July 2019 high of 40.5%.

The employment/population ratio for all workers rose to 58.4% in July but remained well below the February 2020 high of 61.1%. A greatly lessened 20.3 million worked at home because of the coronavirus, down by roughly one-half versus July of last year.

The average duration of unemployment fell to 29.5 weeks from 31.6, but remained well above 17.3 weeks twelve months earlier. The median unemployment duration was 15.2 weeks, down sharply from 19.8 weeks in June.

The teenage unemployment rate slipped to 9.6% and remained below the record 32.1% in April of last year. The rate for workers aged 20-24 held steady at 9.1%. For workers aged 25-54, the rate fell sharply to 4.9%, and remained down from last April's high of 12.8%. For those over 55, the jobless rate declined to 4.4% from 4.9%.

By educational attainment, the rate of unemployment of workers without a high school diploma fell to 9.5% and remained below the 15.1% rate one year earlier. High school graduates without any college were 6.3% unemployed last month, down from the April 2020 high of 17.3%. Those with some college but no degree were unemployed at lessened a 5.0% rate, down sharply from the April 2020 peak of 15.0%. College graduates saw their unemployment rate fall to 3.1% last month but remain higher than the 1.9% low in February of last year.

The employment & earnings data are collected from surveys taken each month during the week containing the 12th of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.

Employment (SA, M/M Change, 000s) Jul Jun May Jul Y/Y 2020 2019 2018
Payroll Employment 943 938 614 5.3% -5.8% 1.3% 1.6%
 Previous Estimate -- 850 583 -- -- -- --
  Manufacturing 27 39 36 2.8 -5.0 1.0 2.0
  Construction 11 -5 -24 2.9 -3.0 2.8 4.6
  Private Service-Producing 659 724 539 6.4 -6.6 1.4 1.5
  Government 240 169 59 2.3 -3.1 0.7 0.5
Average Weekly Hours - Private Sector 34.8 34.8 34.8 34.6 34.6 34.4 34.5
Private Sector Average Hourly Earnings (%) 0.4 0.4 0.5 4.0 4.8 3.3 3.0
Unemployment Rate (%) 5.4 5.9 5.8 10.2 8.1 3.7 3.9
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