- The July jobs report from the U.S. Bureau of Labor Statistics showed another solid month of gains, with employers adding a robust 209,000 positions and the unemployment rate dropping to 4.3 percent — another 16-year low. With July’s numbers, job additions have averaged 195,000 over the past three months. Over the last year, the economy added 2.16 million jobs, solid annual growth.
- In addition, labor-force growth boosted the participation rate, which increased slightly to 62.9 percent in July, up 0.1 percent from the prior month. Though inching up ever so slowly, the job participation rate has at least stabilized over the last year and has shown a slightly increasing trend. The declining trend over the last 15 years reflected demographic shifts, mainly retiring baby boomers and millennials who entered the workforce later than previous generations. Encouragingly, labor-force participation has increased for less-than-high-school and high-school-educated employees, which could be good news for low-skilled workers who may have lost jobs due to automation.
- Job growth continues across many industries. The sectors with the strongest job additions in July included leisure and hospitality, professional and business services (which accounts for many tech jobs), health care, and manufacturing. The construction sector also added jobs but at a slower pace, as employers continue to struggle finding qualified workers.
- Unfortunately, wage growth still leaves much to be desired. Average hourly pay grew by just 2.5 percent, a growth rate that has remained consistent over the last several months. There are many explanations for smaller-than-expected wage growth. One factor is that one in four new jobs is in the restaurant industry, which is one of the lowest-paying sectors. On the other hand, job additions in restaurants suggests that consumers are willing to spend money eating out. Another reason for slower wage growth is that many new workers are young and just entering the workforce. Also, underemployed and long-term unemployed workers still remain in large numbers and are thus holding back wage growth. Economists also attribute much of the slow wage growth to a lack of productivity. However, there is no consensus among economists as to how to properly measure changes in productivity or if we are even calculating that metric correctly in light of the technological advances of the last few decades.
- The Dow Jones Industrial Average ended at an all-time high on Friday, Aug. 4, as the market welcomed July’s strong job numbers.
Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.
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