August 4, 2017

July 2017 Employment Situation Summary (080417): 209K SA Jobs Added, Unemployment Rate Drops to 4.3 Percent; Early Signs of Genuine Wage Growth

Filed under: Economy,Taxes & Government — Tom @ 8:27 am

Predictions:

  • Yahoo’s economic calendar, which seems to be suffering from neglect, doesn’t have one.
  • Bloomberg — 180,000 payroll jobs added, unemployment rate falls to 4.3 percent from current 4.4 percent.
  • Reuters — 183,000 payroll jobs added, unemployment rate falls to 4.3 percent.
  • Associated Press — 180,000 payroll jobs added, unemployment rate falls to 4.3 percent.
  • The range reported at Zero Hedge is a surprisingly tight 175K to 220K jobs added.

As I noted on Wednesday, ADP’s private-sector jobs added for the first six months of this year is over 300,000 greater than the government has reported. ADP’s strong July number would appears to foreshadow a result greater than the high end of Zero Hedge’s range. But … we’ll see.

The report will be here at 8:30. I’ll look at the not seasonally adjusted results after the release.

HERE IT IS (permanent link to full report with tables) — the BLS remains behind ADP by a lot, and prior-month revisions were minor:

Total nonfarm payroll employment increased by 209,000 in July, and the unemployment rate was little changed at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in food services and drinking places, professional and business services, and health care.

Household Survey Data

Both the unemployment rate, at 4.3 percent, and the number of unemployed persons, at 7.0 million, changed little in July. After declining earlier in the year, the unemployment rate has shown little movement in recent months.

Among the major worker groups, the unemployment rates for adult men (4.0 percent), adult women (4.0 percent), teenagers (13.2 percent), Whites (3.8 percent), Blacks (7.4 percent), Asians (3.8 percent), and Hispanics (5.1 percent) showed little or no change in July.

Among the unemployed, the number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.8 million in July and accounted for 25.9 percent of the unemployed.

The labor force participation rate, at 62.9 percent, changed little in July and has shown little movement on net over the past year. The employment-population ratio (60.2 percent) was also little changed in July but is up by 0.4 percentage point over the year.

… Establishment Survey Data

Total nonfarm payroll employment increased by 209,000 in July. Job gains occurred in food services and drinking places, professional and business services, and health care.

Employment growth has averaged 184,000 per month thus far this year, in line with the average monthly gain in 2016 (+187,000).

Employment in food services and drinking places rose by 53,000 in July. The industry has added 313,000 jobs over the year.

Professional and business services added 49,000 jobs in July, in line with its average monthly job gain over the prior 12 months.

In July, health care employment increased by 39,000, with job gains occurring in ambulatory health care services (+30,000) and hospitals (+7,000). Health care has added 327,000 jobs over the past year.

Employment in mining was essentially unchanged in July (+1,000). From a recent low in October 2016 through June, the industry had added an average of 7,000 jobs per month.

Employment in other major industries, including construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, and government, showed little change over the month.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in July. In manufacturing, the workweek was also unchanged at 40.9 hours, and overtime remained at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was 33.7 hours for the fourth consecutive month.

In July, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents to $26.36. Over the year, average hourly earnings have risen by 65 cents, or 2.5 percent. In July, average hourly earnings of private-sector production and nonsupervisory
employees increased by 6 cents to $22.10.

The change in total nonfarm payroll employment for May was revised down from +152,000 to +145,000, and the change for June was revised up from +222,000 to +231,000. With these revisions, employment gains in May and June combined were 2,000 more than previously reported. … Over the past 3 months, job gains have averaged 195,000 per month.

Today’s payroll jobs number means that BLS, after seven months, is almost exactly as far behind ADP in year-to-date private-sector payroll additions as it was in June. Something’s eventually got to give.

The July increase in hourly payrolls, if sustained, annualizes to 4.1 percent (9 cents times 12, divided by last month’s $26.27).

Not seasonally adjusted results:
- Total nonfarm — 1039K jobs lost.
- Private sector — 111K jobs gained.

Let’s look at the history for context:

NSAandSApayrollsMayJuly2007to2017

If I had been able to benchmark ahead of time, I would have hoped for 950,000 total nonfarm job losses and at least 200,000 in the private sector. So the actual results are somewhat disappointing.

The total nonfarm seasonal conversion appears a bit overstated in the context of the past two years, while they look a bit overstated in the context of the three years before that. So on balance, one would have to say they adequately reflect the underlying raw data. On the other hand, the private sector seasonal conversion looks to be a bit high, roughly 30,000 higher than one might expect based on previous years’ conversions.

Other points (references are to seasonally adjusted figures unless otherwise indicated:

  • The civilian workforce increased by 349K (710K in the past two months). Obviously on a net basis, all but 4,000 of them found jobs. Jobs added per the Household survey were therefore 345K (590K in the past two months).
  • The black unemployment rate, which is pretty volatile month to month, increased from 7.1 percent to 7.4 percent, with an odd mixture of an increase for 20-and-over males from 6.3 percent to 7.0 percent, and a decrease for 20+ women from 6.8 percent to 6.5 percent.
  • Here’s an oddity. Household Survey male employment dropped by 17K, while female employment increased by 362K. I guess we’ll have to look elsewhere to find Donald Trump’s alleged “war on women.”
  • Another couple of figures which are volatile from month to month are those for full-time and part-time employment. In July, full-time jobs dropped by 54K, while part-timers increased by 393K. So far this year, 1.677 million full-time jobs have been added, while part-time employment has dropped by 360K.
  • Manufacturing employment increased by 13K (29K in past two months). The BLS, as seen above, described that as “little changed.” Really?
  • The past two months’ hourly wage increases have totaled 14 cents. Annualized, that would be a rate of 3.2 percent (14 times 6, divided by May’s hourly rate of $26.22). We need to see several more months like July’s 9-cent increase to make a definitive case that wages are finally rising well ahead of inflation, something which basically didn’t happen during the Obama administration.

Overall, July’s report is reasonably strong, but not the blockbuster one might have expected, given the ADP employment report’s continued strength. The mystery concerning whether ADP or BLS is more correct about private-sector employment increases this year remains unsolved.

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6 Comments

  1. The Not In Labor Force # is still continuing the flat trend.

    https://data.bls.gov/timeseries/LNS15000000

    Run out the graph to 1980 and you will see this repeats Reagan’s trend. If past is prologue, the level off here is a strong indicator that the economy is going to take off due to structural changes occurring.

    IF the August employment #s continue with the historic trend there will be a drop off as seasonal hires drop off. However, IF the #s continue to rise then we have proof positive of an expanding economy absorbing and converting part time jobs to full time jobs.

    Comment by dscott — August 4, 2017 @ 9:15 am

  2. There are 60 million Social Security recipients and probably 10 million government retirees, leaving maybe 24 million others who COULD enter the labor force. If the NILF number doesn’t drop by much, I think total employment may hit a wall, and it will be used to support the “but we have to have illegals” argument.

    Comment by Tom — August 4, 2017 @ 10:07 am

  3. U6 unemployment rate- Table A-15

    https://www.bls.gov/news.release/empsit.t15.htm

    1.2% drop YOY

    ——————

    These people have done a nice job on charting the U6 and making comparisons to U3.

    https://unemploymentdata.com/current-u6-unemployment-rate/

    Based on the chart history, we will know what full employment really looks like when the differential (U6 -
    U3)drops between 3% and 3.5%. We are hovering around 4% now.

    This one is worth bookmarking.

    Comment by dscott — August 5, 2017 @ 10:38 am

  4. I’m having a hard time accepting 4 percent as full employment, given that there are several states in the low 3s, and the wage pressures there are nowhere near what one might expect in a genuinely tight labor market. I think U-3 and U-6 are both understated, because they still arbitrarily exclude people from the civilian workforce who are sporadically looking for work and can’t find it.

    Comment by Tom — August 5, 2017 @ 11:25 am

  5. #4, In those states with low unemployment, you have neighboring states labor from which to draw from. The labor market in each state is not a zero sum game due to the open borders between the states. As long as there are pockets of high unemmployment in the country, internal migration is still the optimum choice that is mutually exclusive of foreign workers. While it is true that greedy cheapskates will proffer the argument of foreign workers, that argument looks very weak when local area unemployment for Yuma, AZ and El Centro, CA are in excess of 20%!!!!

    https://www.bls.gov/web/metro/laummtrk.htm

    As long as there are in excess of 40 million receiving SNAP currently and versus the historic 17 million, there is zero excuse for foreign workers. The GOP is in a bind with the budget, they have to reduce entitlements and the only politically safe way to do that is get these people a job to get them off the rolls. If the GOP leadership wants to commit political suicide with the base, then I’m all for handing them the rope. They should go use it now and get it over with. You can’t have your cake and eat it too, that’s life and they need to grow up.

    Comment by dscott — August 6, 2017 @ 12:04 pm

  6. #4, the round number is around 54 mil for everyone actually on SSI (retiree) and OSDI (disabled) when you subtract out those getting survivor benefits:

    https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/

    In order to qualify for survivor benefits you can’t be working. That’s about 1.901,000 children on SSI and 1,630,000 on OSDI. Children being under the age of 18 and in school. So that’s around 2.5 mil children who should be coming into the workforce in less than 10 years, a portion of whom are now 16 and older.

    Comment by dscott — August 6, 2017 @ 12:12 pm

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