June’s jobs report from the Bureau of Labor Statistics comfortably surpassed expectations, with non-farm payrolls increasing by 943,000, compared with an expected increase of 870,000. The unemployment rate fell from 5.9% to 5.4% with the number of unemployed falling by 782,000 to 8.7 million.
The Labor Force Participation Rate increased slightly to 61.7%.
Private Sector Jobs increased 708,000 in July, with most of those gains being in the service sector.
Leisure and Hospitality alone accounted for 380,000 jobs, but the industry is still down 1.7 million from February 2020.
Transportation and Warehousing had modest gains of 49,700 jobs.
Health Care employment increased 36,800 as the sector continues returning to normal and reschedules delayed appointments and procedures from the past 17 months.
Both Manufacturing and Construction had anemic job growth with manufacturing increasing 27,000 and construction by 11,000.
Government accounted for a relatively large portion of total job increases in July, adding 240,000 jobs. Nearly all this increase came from local government, which added 230,000 jobs in July.
Oil and gas Extraction had a particularly weak month, adding a mere 700 jobs. Inventory draw-downs and increased overseas production have put pressure on both prices and domestic production.
Earnings, Revisions, Miscellaneous
Average hourly earnings increased 11 cents to $30.54, with a 4.0% Y-o-Y increase.
The average work week remained unchanged at 34.8 hours for the third month in a row.
Wage inflation will contribute to inflation not being transitory, but permanent. Still, wage increases have not kept up with inflation, so workers are worse off in terms of purchasing power compared to a year ago.
June total nonfarm payroll was revised up 88,000 and May was revised up 31,000. Together, this is an increase of more than 100,000 additional jobs above the previous estimates.
Prime Age (25-54) Employment increased 98,131 with an unemployment rate of just 4.9%, which is approaching full employment.
All six measures of unemployment fell between 0.4% and 0.6% with U-6 at 9.2%.
The 10-year Treasury yield increased more than 7 basis points after the report, as investors anticipate the effects of wage inflation on the overall price level.
July’s job report is a mix of strength of weakness. While the labor market added almost a million jobs, about a quarter of those jobs were in government. The market is still 5.7 million jobs below its pre-pandemic level and there are growing headwinds—in the form of unwise government policies—that will likely mitigate future growth rates. Inflation poses a significant risk to the labor market and economy at large.
- Instead of hiding pork-barrel spending in multi-trillion-dollar “infrastructure” bills, Congress should reduce taxes, spending, and regulation to promote job growth.
- The 24 states that still give out COVID-19 unemployment bonuses should end the program to facilitate a faster labor market recovery.
- Government-imposed lockdowns have been ineffective at reducing deaths but have severely hampered the labor market; these government restrictions should, therefore, be avoided in the future.