The figures suggest the economy is cooling, but not as much as many analysts had feared a few months ago.
By guest author Patricia Cohen from New York Times
The Numbers
- 164000 jobs were added last month. Economists had expected a gain of about 165000.
- The unemployment rate was 3.7 percent, the same as in June.
- Average hourly earnings rose by 0.3%. The year-over-year gain was 3.2 %.
The Takeaway
Just two days after the Federal Reserve moved to ward off economic snags by paring interest rates, the monthly jobs report signals that the labor market is maintaining its energy during a record-long hiring streak.
While last month’s payroll additions did not match gains in June, July’s numbers show that employers continue to make room for new job seekers.
“Job gains were fairly broad-based across different sectors,” said Gregory Daco, chief economist of Oxford Economics USA. “This was a good jobs report overall.”
Restaurants, business services, health care and education all posted solid gains. And the manufacturing sector, which had been slowing, created 16000 jobs.
The tight job market is continuing to pull in workers from the sidelines, and the labor force participation rate, which has not yet returned to pre-recession levels, did tick up. A broader measure of unemployment that includes part-timers who would prefer to work full-time and those too discouraged to even look for a job dropped to 7 %, the lowest rate since 2000.
Retailers continued to struggle, cutting jobs in July for the sixth month in a row. The mining sector also contracted, probably partly as a result of lower oil prices.
Revisions to previous reports reduced job creation in prior months by 41,000. Payroll gains have clearly slowed since last year when the average monthly gain was 223000. The monthly average for the last three months was 140000. But, this cooling is not surprising since the expansion has now passed the 10-year mark.
And as long as employers create roughly 100000 jobs each month, the labour market can keep pace with population growth and the jobless rate will hold steady.
The report reinforces the Fed’s stance that the economy’s underpinnings remain strong, even though it is unlikely to temper the push for further rate cuts from investors and President Trump.
Anxiety about the economy stems less from the labor market than from concerns about a global slowdown, trade tensions, muted inflation and the risk of tightening financial conditions.
Mr. Trump ratcheted up those concerns on Thursday by announcing he intends to impose a 10 percent tariff on an additional USD 300 billion worth of Chinese imports created more uncertainty about trade.
“Trump is trying to kill two birds with one stone: getting China to accept any type of trade deal and pushing the Fed to cut rates,” Mr. Daco said. “It’s like shooting yourself in the foot just to get another dose of morphine. It’s not a good approach.”
Those worries, though most likely behind a slowdown in manufacturing, have not yet trickled down to the rest of economy. Confident consumers are still snapping open their wallets, and employers are searching for more workers.
“We are seeing it across the economy: Companies are hiring across industries, from data analysts to delivery drivers,” said Becky Frankiewicz, president of ManpowerGroup North America. “I meet with C.E.O.s across the country on a regular basis, and they say they can’t find the skilled workers they need.”
The number of new applicants applying for unemployment insurance has stayed low.
Employers on the Ground
A survey of business owners last month by the National Federation of Independent Business found job creation remains at a historically high level.
Ask pretty much any general contractor, hospital leader or restaurant owner about his or her biggest headaches, and a lack of qualified workers comes up.
“Ten percent of our positions are always open,” said Ignacio Garcia-Menocal, a co-founder and chief executive of Grove Bay Hospitality, which operates several celebrity-chef restaurants and employs 450 people. With two restaurants opening soon, Mr. Garcia-Menocal said he was looking to hire 40 to 50 people, from dishwashers who start at $10 an hour to general managers, whose salaries can range from USD 70000 to USD 90000 a year.
The competition for workers is intense, Mr. Garcia-Menocal said during a lunchtime shift at Root & Bone in Coral Gables, Fla.: “Somebody will jump to a place next door for a dollar.” He said that his company had also raised wages but profit margins in the restaurant business were too thin to go much higher.
Grove Bay has dangled other incentives before its employees, including management training, health insurance and a paid monthlong sabbatical for those who have been with the company for seven years. The company regularly holds events for employees where prizes like iPhones, televisions and USD 1000 gift cards are raffled off, Mr. Garcia-Menocal said.
He is also closely watching how Shake Shack’s experiment with a four-day workweek in some locations goes.
Frank Lopez, executive vice president and chief human resources officer for Ryder System, which has 800 locations throughout North America, said explosive growth over the past five years had cranked up his company’s need for skilled workers, particularly drivers and diesel mechanics. “I’m never at full employment,” Mr. Lopez said.
To cope, the truck leasing, maintenance and logistics company has stepped up its efforts to develop its own talent pool, looking to recruit students right out of high school and service members finishing up military tours. It has also become partners with Women in Trucking, a trade association, to attract more women to the industry.“Someone can start out pumping fuel and washing trucks and become a trained mechanic,” Mr. Lopez said.
The building trades have also ramped up their recruitment of women, which Jim Grossmann, director of construction operations at Suffolk Construction, described as “an untapped population.” His company employs 2,300 people.
Those at the lower end of the pay scale have benefited the most from employers’ scrimmage for workers. Still, pay increases seem far outpaced by complaints from employers about labor shortages. Average wage growth has kept its nose above the 3 percent mark, but the pace has not moved much in recent months, feeding concerns that wage growth has plateaued.
Some analysts expected much stronger government hiring as the Census Bureau gears up for its 2020 count. Only 2,000 workers have been hired so far this year even though preliminary canvassing is supposed to start in August. By comparison, the bureau had hired tens of thousands of temporary workers by spring 2009. New technology has significantly reduced the need for staff, according to the bureau.
The Political Implications
The number of jobs created this year has not matched the 223000 monthly average in 2018, when steep tax cuts and government spending revved up the economy.
Still, the low unemployment rate has helped Mr. Trump make the case that the economy’s growth is one of his signature achievements, a boast that is expected to be a cornerstone of his 2020 re-election strategy.
Democratic contenders, by contrast, have had to skip over the labour market when looking for the economy’s soft spots. They have pointed to mediocre wage increases, growing levels of household debt, yawning inequality, slowing growth and rising trade tensions.
During the Democratic debates this week, Senator Bernie Sanders of Vermont, for example, said Americans were “living paycheck to paycheck” and denounced profitable corporations that avoided paying taxes.
Julián Castro, the housing secretary in the Obama administration, declared that “the idea that America is doing just fine is wrong.”
“There are a lot of Americans right now that are hurting,” he said. “Just go and ask the folks that just received notice that they’re getting laid off by General Motors.”
And last month, Senator Elizabeth Warren of Massachusetts posted an essay on Medium warning of “the coming economic crash” and the “economy’s shaky foundation.”
It is a strategy that Mr. Trump used himself during this 2016 campaign. Although the jobless rate dropped sharply and millions of jobs were created during President Barack Obama’s tenure, Mr. Trump hammered away at the economy’s weaknesses, highlighting job losses in manufacturing and dismissing the government’s job reports as phony.
Even with the jobless rate at a 50-year low, the expansion remains uneven. A broader measure of unemployment that includes part-timers who would prefer full-time work and people who are too discouraged to even search for a job is close to twice the official unemployment rate. That helps explain why so many Americans say they lack economic security and stability.
And the jobless rates for African-Americans and Hispanics are much higher than they are for whites.
The job picture also varies widely depending on location. In several metropolitan areas, including New Orleans and Flint, Mich., the unemployment rate lingers above the national average.