Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
It's the first Friday of the month, so today's all about jobs.
Let's Cut to the Chase
To change things up a bit, today we’ll get right to the summary of the latest data on the labor market.
- There were 187,000 jobs added in July—less than expected, but still a good number.
- The unemployment rate fell to 3.5%, which is near a record low.
- Weekly jobless claims ticked up 6,000, but are still very low.
- There are still 9.58 million available jobs out there waiting to be filled.
- Wages are up 4.4% over the past year, while prices have risen just 3.1%.
It’s all good on the labor front, so readers who are busy can just stop here, if they want. For those who’d like more information, see the next piece.
Now For the Details
In 1907, Mark Twain said the following:
"There are three kinds of lies: lies, damned lies, and statistics."
I’ve never been fond of that saying, as it implies that economists are a bunch of liars. Just like beauty, data is in the eye of the beholder, and their experiences and biases will influence how they view it.
The pessimists out there will focus on the fact that employment rose less than the 200,000 Dow Jones estimate. They will also point out that July’s 187,000 gain is much lower than the 312,000 average monthly gain over the prior 12 months. To complete the trifecta of pessimism, job gains for May and June were revised down by a total of 49,000.
Here’s my counter to that negativism:
- Job growth was slightly higher in July than June.
- The household survey—which is used to calculate the unemployment rate—showed a 268,000 gain in employment last month. You may remember that there are two surveys used in the monthly employment reports, one of households, and one of payrolls. The payroll survey is the larger of the two, and the basis for the change in employment each month. That said, the household survey does a better job of picking up new businesses, and that may explain the difference.
- Job growth would be stronger if there were more people looking for jobs. The labor force participation rate—the percentage of working age people working or looking for work—hasn’t changed in five months. And at 62.6%, the rate remains lower than its pre-pandemic level. Companies currently have over 9.5 million jobs they have to fill, and remain in desperate need of workers.
- It was inevitable that hiring would slow, but that doesn't mean a recession is imminent. Aaron Judge won’t hit 62 homers again this year, but that doesn’t mean the Yanks should trade him. You also must remember that a cooling labor market will give the Fed one more reason to stop hiking rates, which is a good thing. I can’t say what impact the July employment report will have on Fed policy, as they don’t meet again until September. We’ll have to wait and see what the August report says.
There are always two sides to every story, and many say the truth lies somewhere in between. That may be true, but I for one enjoy debating with other economists and many of you readers, as you can only learn by listening.