KEY TAKEAWAY:According to the Bureau of Labor Statistics (BLS) recent report, employment in the U.S. increased in July 2024 by 114,000 which, combined with the downward revisions in May and June, show a slower pace compared to the strong growth seen in the first three months of the year. The unemployment rate increased to 4.3%.
Employment
In Brief: The employment numbers in July showed sub-par growth, resembling the results from April. The big question many economists are asking is whether this is a temporary downturn that will be offset by healthy job gains in the coming months, or if this indicates a new, lower pattern of job creation that we have been expecting.
Diving in: In addition to the weak job numbers, July’s payroll results were disappointing across the board. As a result of the recent CPI values, wages showed virtually no change. Moreover, weekly hours decline by 0.3%, which indicates a slack in labor demand beyond the headline numbers.
Unemployment
The Big Picture: The U-6 unemployment rate, which includes discouraged, underemployed, and unemployed workers in the country, surged to 7.8% in July. The U-3 unemployment rate, which indicates only the number of unemployed people actively seeking a job, also rose steeply to 4.3%.
What Does This Mean?: The rise in the U-3 and U-6 unemployment rates signal the labor market is weakening. While a rising labor force participation rate can be a good sign, when it is accompanied by such a strong increase in the U-6 unemployment rate, it suggests that many workers are settling for part-time jobs rather than looking for full-time work.
The employment numbers above reflect the seasonally adjusted, monthly change in non-farm jobs.
The unemployment rate measures the percentage of the labor force that is currently without a job. The national unemployment rate has remained steady throughout 2023 and now into 2024, fluctuating between 3.7% and 4.1%.
U-3 unemployment rate is the most commonly reported rate in the United States, representing the number of unemployed people actively seeking a job. The U-6 rate covers discouraged, underemployed, and unemployed workers in the country.
The labor force participation rate is an estimate of an economy’s active workforce. YTD the U.S. labor force participation rate ranged between a low of 62.5% and a high of 62.8%, according to the U.S. Bureau of Labor Statistics.
How We Matched Up
Geographic Solutions: Job creation finished below Geographic Solutions' expectations of 237,000 jobs. The unemployment rate expectation of 4.0%, was just below the 4.1% result.
The Wall Street Journal: The Wall Street Journal's expectation of 200,000 jobs being added to the labor market was slightly below what was recorded in the labor market report. The unemployment rate forecast of 4.0% was just under.
ADP: According to ADP’s latest estimate, the private sector added 150,000 jobs in June, compared to the 136,000 reported by the BLS.
Stock Up: Construction and Trade, Transportation & Utilities
Key Takeaway: While Private Education & Health Services added the highest number of jobs in July (57,000) it was far off its average job growth over the previous 12 months (79,000). The best performances compared to their recent histories were in Construction (25,000) and Trade, Transportation & Utilities (22,000).
Why: In construction, specialty contract construction accounted for most of the new jobs rather than building construction. Transportation & Warehousing made up two-thirds of all job creation in Trade, Transportation & Utilities.
Stock Down: Information and Government
Key Takeaway: Not typically a major factor in overall job performance, the Information Sector was down this past month with 20,000 jobs lost in July. Government employment disappointed with only 17,000 jobs for the month when its 12-month average was 44,000.
Why: Losses in the Information sector were widespread but most concentrated in Publishing. Local governments shed more than 16,000 non-education jobs.
Will job creation remain robust over the coming months?
Based on the numbers from the latest report, we anticipate employment growth will slow down but will continue to add jobs at a slower pace in the coming months. This indicates that businesses are still looking to expand but more gradually.
Do workers or employers have more power in the labor market?
Neither side has a definitive upper hand, but it appears that the decline in unfilled job openings is giving employers more influence in the job market.
How has the labor market shifted since March 2023?
The labor market has continued to add jobs without slowing down despite widespread expectations of a recession.
Geographic Solutions derives its employment forecast and unemployment rate forecast from internal data on the number of job openings, searchers, and employment and unemployment applications filed on Geographic Solutions' state client sites. The forecast uses unemployment claims data from the U.S. Department of Labor (USDOL).
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