August 3, 2018

July 2018 Employment Situation Summary (080318): Will the Hottest Job Market Since the Recession Continue? RESULTS: 157K Payroll Jobs Added, Prior Months Revised Up by 59K; Jobless Rate at 3.9 Pct.; Hispanic Rate Hits Lowest-Ever 4.5 Pct.

Filed under: Economy,Taxes & Government — Tom @ 7:17 am

Predictions:

  • MarketWatch — 200,000 payroll jobs added.
  • CNNMoney cites a Thomson Reuters prediction that the unemployment rate will drop to 3.9 percent and that 190,000 payroll jobs will be added.
  • The Wall Street Journal is also predicting a 3.9 percent unemployment rate and 190,000 payroll jobs added.
  • The Associated Press is going with a 3.9 percent unemployment rate and 191,000 payroll jobs.

Not seasonally adjusted benchmarks:

Before we look at July, let’s look at an important comparison I meant to make after the June report’s release, but didn’t because the interactive tables at the government’s Bureau of Labor Statistics were inaccessible for three days (Friday through Sunday, July 6-8).

In finally looking at this raw data, we once again learn a lesson that almost no one else in the media, and even the vast majority of economists and business analysts, wants to learn: You haven’t genuinely completed your analysis until you look at the raw numbers.

The economy adds the most jobs (BEFORE seasonal adjustments) during the five months of February through June every year. It’s important to watch these months to gauge how the job market is really performing.

Guess what? 2018 has had the highest number of February-June job additions — by far, (and despite California’s noticeable drag) — compared to every other year since the recession — yet that result is not reflected in seasonally adjusted results which show 2018 coming in lower than two of the seven previous years:

FebToJune2011to2018SAandNSAjobs

2014 and 2015 have higher seasonally adjusted Feb.-June results, even though their actual additions were 209,000 and 356,000 lower than the 4.545 million seen in 2018.

The differences are even greater in the private sector:

FebToJune2011to2018SAandNSApvt

2011 and 2014 have higher seasonally adjusted Feb.-June results, even though their actual additions were 320,000 and 287,000 lower than the 4.465 million seen in 2018. Additionally, the seasonally adjusted result in 2015 is almost the same as 2018, even though that year had 402,000 fewer raw job additions.

What this shows, despite seasonally adjusted data which indicates otherwise, is that the U.S. job market from February through June of this year was the hottest on record, PERIOD. It’s utterly reasonable, after allowing about 30 days for employers to react to their late-December passage, to credit the Republican Congress/Trump tax cuts for this result.

Will the momentum continue in July? Let’s look at the track record, and establish this month’s performance benchmarks:

NSAandNSAresultsJuly2011to2018

July usually has large total nonfarm losses, likely because most public school employees take the summer off. Net private sector hiring is typically modest, as most seasonal hiring takes place in May and June.

A strong, momentum-maintaining July will show 950,000 or fewer actual (NSA) job losses and 225,000 or more actual private-sector job gains. A boomer of a result would be 900,000 or fewer nonfarm losses and 275,000 or more private-sector gains.

The BLS’s report will be here at 8:30 (the permanent link with tables, when it goes live, will be here).

HERE IT IS: Lower rate, not as many payroll jobs as expected —

Total nonfarm payroll employment rose by 157,000 in July, and the unemployment rate edged down to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, in manufacturing, and in health care and social assistance.

Household Survey Data

In July, the unemployment rate edged down by 0.1 percentage point to 3.9 percent, following an increase in June. The number of unemployed persons declined by 284,000 to 6.3 million in July. Both measures were down over the year, by 0.4 percentage point and 676,000, respectively.

Among the major worker groups, the unemployment rates for adult men (3.4 percent) and Whites (3.4 percent) declined in July. The jobless rates for adult women (3.7 percent), teenagers (13.1 percent), Blacks (6.6 percent), Asians (3.1 percent), and Hispanics (4.5 percent) showed little or no change over the month.

Among the unemployed, the number of reentrants to the labor force decreased by 287,000 in July to 1.8 million, following an increase in June. (Reentrants are persons who previously worked but were not in the labor force prior to beginning their job search.)

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.4 million in July and accounted for 22.7 percent of the unemployed.

The labor force participation rate, at 62.9 percent in July, was unchanged over the month and over the year. The employment-population ratio, at 60.5 percent, was little changed in July but has increased by 0.3 percentage point over the year.

Establishment Survey Data

Total nonfarm payroll employment increased by 157,000 in July, compared with an average monthly gain of 203,000 over the prior 12 months. In July, job gains occurred in professional and business services, in manufacturing, and in health care and social assistance.

Employment in professional and business services increased by 51,000 in July and has risen by 518,000 over the year. Over the month, employment edged up in temporary help services (+28,000) and in computer systems design and related services (+8,000).

Manufacturing added 37,000 jobs in July, with most of the gain in the durable goods component. Employment rose in transportation equipment (+13,000), machinery (+6,000), and electronic instruments (+2,000). Over the past 12 months, manufacturing has added 327,000 jobs.

In July, employment in health care and social assistance rose by 34,000. Health care employment continued to trend up over the month (+17,000) and has increased by 286,000 over the year. Hospitals added 7,000 jobs over the month. Within social assistance, individual and family services added 16,000 jobs in July and 77,000 jobs over the year.

Employment in food services and drinking places continued to trend up over the month (+26,000). Over the year, the industry has added 203,000 jobs.

Construction employment continued to trend up in July (+19,000) and has increased by 308,000 over the year.

In July, employment in retail trade changed little (+7,000). Job gains occurred in general merchandise stores (+14,000), clothing and clothing accessories stores (+10,000), and food and beverage stores (+8,000). These employment gains were offset by a decline of 32,000 in sporting goods, hobby, book, and music stores, reflecting job losses in hobby, toy, and game stores.

Employment showed little or no change over the month in other major industries, including mining, wholesale trade, transportation and warehousing, information, financial activities, and government.

The average workweek for all employees on private nonfarm payrolls decreased by 0.1 hour to 34.5 hours in July, following an increase of 0.1 hour in June. In manufacturing, both the workweek and overtime were unchanged in July, at 40.9 hours and 3.5 hours, respectively. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours.

In July, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $27.05. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent.

Average hourly earnings of private-sector production and nonsupervisory employees increased by 3 cents to $22.65 in July.

The change in total nonfarm payroll employment for May was revised up from +244,000 to +268,000, and the change for June was revised up from +213,000 to +248,000. With these revisions, employment gains in May and June combined were 59,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 224,000 per month over the last 3 months.

JULY Not Seasonally Adjusted Benchmarks:

As might be expected, these disappointed, turning in the worst number since 2013 and 2012, respectively:

NSAandNSAresultsJuly2011to2018upd

The seasonally adjusted prior-month increases noted in BLS’s report are clearly caused by upward revisions to the raw numbers, and I will revise the tables presented above to reflect that in a separate post.

Seasonal Conversions:

The Trump administration caught a relatively small break in the seasonal conversions, as they overstate the strength of the today’s raw results compared to the past four years’ data by 47,000 and 26,000 for total nonfarm and the private sector, respectively:

BBnsaAndSArealityCheck0818

So far this year, though there have been large individual monthly fluctuations, the seasonal conversions have understated underlying results by minor amounts (49,000 and 48,000, respectively).

More shortly.

UPDATE: Took a while to get back to this because of the raw numbers post, which is indeed “The Econ Story of the Year So Far.”

Here are quick observations about today’s numbers (references are to seasonally adjusted data unless otherwise noted):

  • Employment per the Household Survey increased by 389,000.
  • The Hispanic unemployment rate of 4.5 percent represents yet another all-time low.
  • The BLS’s mention of “the number of reentrants to the labor force” appears to be a new thing. If I understand today’s number correctly, today’s 1.8 million new entrants is on top of 2.1 million new entrants in May. That’s almost 4 million in two months, which (again if I read this correctly) makes a mockery of those claiming that there haven’t been a lot of people sitting on the sidelines.
  • The black unemployment rate stayed in the mid-6 percent range (6.6 percent), but the rate for 20-and-over black men fell to 6.1 percent.
  • Full-time employment increased by 453,000, while part-timers dropped by 36,000.
  • The fully-loaded U-6 unemployment rate fell to 7.5 percent, which is the lowest since.
  • The pay increases weren’t impressive, and the reduction in the average work week was disappointing.
  • Goods-producing jobs had another very good month: +37K Manufacturing and +19K Construction, though Mining fell by 4K.

Overall, the big headline today is how revisions to May and June made the Feb.-June period of high job growth in the raw, i.e., actual numbers, set a new all-time record for those five months. July itself was acceptable, but just barely, and one hopes that we’ll see upward revisions in the coming months.

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2 Comments

  1. [...] numbers seen earlier this morning in the jobs report post — The February through June Trump economy added more jobs before seasonal adjustments (i.e., [...]

    Pingback by BizzyBlog — August 3, 2018 @ 9:43 am

  2. Well, here is the human interest side of the stats:

    Poll: Black Support For Trump Nearly Doubles Since Last Year

    https://www.weaselzippers.us/392769-poll-black-support-for-trump-nearly-doubles-since-last-year/

    Trump’s approval by Blacks as a group went up from 15% last year to 29% this year. Yeah, the Democrats are terrified. Liberals virtue signal and Conservatives get results.

    Are you sick and tired of empty promises from self serving politicians or are you ready to vote for someone with proven results???? The choice is stark, those who represent their own interests in re-election (job security) or those who make sure you actually get a shot at opportunity?

    Comment by dscott — August 4, 2018 @ 9:03 am

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