Employment Report (Jul.) - Capital Economics
US Economics

Employment Report (Jul.)

US Data Response
Written by Andrew Hunter
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The 1,763,000 increase in non-farm payrolls in July confirms that, despite the resurgence in new coronavirus cases, the recovery remains firmly intact. With new infections now trending lower again and high-frequency activity indicators showing tentative signs of a renewed upturn, employment should continue to rebound over the coming months.

Recovery remains intact despite virus resurgence

  • The 1,763,000 increase in non-farm payrolls in July confirms that, despite the resurgence in new coronavirus cases, the recovery remains firmly intact. With new infections now trending lower again and high-frequency activity indicators showing tentative signs of a renewed upturn, employment should continue to rebound over the coming months.
  • Unsurprisingly given the new restrictions on bars and restaurants in many states, the slowdown was driven by the leisure and hospitality sector. That said, after a gain of nearly 2 million in June, it still added a healthy 592,000 jobs, while several other sectors saw a similar-sized slowdown, including retail, healthcare and, particularly, manufacturing. Government payrolls actually saw a much stronger gain of 301,000, from 54,000 in June, but that was mainly due to a seasonal quirk. Fewer state and local government education employees were let go at the end of the school year because many had already been furloughed during the initial lockdowns. Government payrolls were also boosted by 27,000 temporary Census hires.
  • The unemployment rate fell to 10.2%, from 11.1%, as the household measure of employment rose by 1.35 million, but it was also due to a somewhat puzzling decline in the labour force which, after rebounding by 3.5 million over May and June, fell by 62,000 in July. As in previous months, the BLS reported that a number of workers continued to be mistakenly classified as employed rather than unemployed on temporary layoff. Without that distortion, the unemployment rate would have been closer to 11% in July. The good news is that most of the unemployed continued to report themselves as on temporary layoff, with the 1.8% of workers permanently losing their jobs unchanged from June’s reading and still well below the peak of 4.4% seen after the Global Financial Crisis. (See Chart 1.)
  • July’s gain still leaves employment 13 million below its February level but, considering employment was more than 22 million below that level in April, that means more than 40% of those job losses have already been reversed. Although the average pace of monthly gains is likely to remain slower than it was during the initial stages of the recovery, that recovery looks set to continue.

Chart 1: Unemployment Rate by Reason (%)

Source: Refinitiv

Table: Labour Market Data

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Non-Farm Payrolls (000s)

208

185

261

184

214

251

-1373

-20,787

2,725

4,791

1,763

Unemployment Rate (%)

3.5

3.6

3.5

3.5

3.6

3.5

4.4

14.7

13.3

11.1

10.2

Ave H’rly Earnings (%m/m)

0.0

0.3

0.4

0.1

0.2

0.3

0.6

4.7

-1.1

-1.3

0.2

Ave Hourly Earnings (%y/y)

3.1

3.2

3.3

3.0

3.1

3.0

3.4

8.0

6.6

4.9

4.8

Ave Weekly Hours Worked

34.4

34.4

34.3

34.3

34.3

34.4

34.1

34.2

34.7

34.6

34.5

Source: Refinitiv


Andrew Hunter, Senior US Economist, andrew.hunter@capitaleconomics.com