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My focus remains on whether jobs growth continues to decelerate, and whether the leading indicators, particularly manufacturing and construction jobs, as well as the unemployment rate (which leads to going into recessions) have meaningfully deteriorated.

Almost all of these items did deteriorate in July.

Here’s my in depth synopsis.
 

Headlines:

• 187,000 jobs added, which would be the weakest monthly number since December 2020, except that last month was revised down to 185,000.
• Private sector jobs increased by 172,000. Government jobs increased by 15,000
• May was revised lower by -25,000 and June by -24,000, for a total of -110,000. The three-month moving average decreased to 218,000, the lowest since January 2021.
• The alternate, and more volatile measure in the household report rose by 268,000 jobs. The YoY% gain in this report is +1.9%.
• The U3 unemployment rate declined another -0.1% to 3.5% (still above the 3.4% low last year). The civilian labor force, the denominator in the figure, rose slightly (by 152,000), while the numerator, the number of unemployed, declined by -116,000.
• U6 underemployment rate declined -0.2% back to 6.7% 
• Further out on the spectrum, those who are not in the labor force but want a job now declined -142,000 to 5.247 million, still well above its post-pandemic low of 6.5% set last December.
   

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall and help us gauge how much the post-pandemic employment boom is shading towards a downturn.  These were almost all negative:

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.1 to 40.6, equal to its lows earlier this year and down -0.9 hours from the February 2022 peak of 41.6 hours.
• Manufacturing jobs declined by -2,000.
• Within that sector, motor vehicle manufacturing jobs declined by -2,200. 
• Construction jobs increased by 19,000, in virtually every subsector except for residential construction.
• Residential construction jobs, which are even more leading, declined by -5,500. It continues to appear likely that January was the peak for this sector.
• Goods jobs as a whole rose by 18,000. These should decline before any recession occurs. They remain up 1.7% YoY, which is a very good pace compared with most of the last 40 years.
• Temporary jobs, which have generally been declining late last year, declined further, by -2,200.
• the number of people unemployed for 5 weeks or less declined from -54,000 to 2,004,000.
   

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.13, or +0.5%, to $28.96, a YoY gain of 4.8%, a 0.1% uptick from its lowest YoY gain since June of 2021 set one month ago.
   

Aggregate hours and wages: 

• the index of aggregate hours worked for non-managerial workers increased 0.2%, and is up 1.6% YoY.
•  the index of aggregate payrolls for non-managerial workers rose 0.6%, and increased 6.4% YoY, 0.2% higher than its 2+ year low set one month ago, and significantly above the inflation rate, meaning average working class families have more buying power.
   

Other significant data:

• Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose only 17,000, -352,000, or -2.1% below their pre-pandemic peak.
• Within the leisure and hospitality sector, food and drink establishments rose 13,400, but remain-64,400, or -0.5% below their pre-pandemic peak.
• Professional and business employment declined by -8,000. This is the first decline in this important sector since the end of the pandemic lockdowns. This series had already been decelerating and is currently up  1.6%, its lowest YoY gain since March 2021.
• The employment-population ratio rose 0.1% to 60.4%, vs. 61.1% in February 2020.
• The Labor Force Participation Rate was unchanged at 62.6%, vs. 63.4% in February 2020.
   

Summary

This was a soft report (nevertheless quite positive by historical standards), which together with revisions to the last several months, marks another notch downward in deceleration. 

Almost all of the leading metrics were down. Employment in the entire goods sector has only shown gains due to transportation equipment manufacturing and non-residential construction. The comeback in leisure and hospitality jobs is much fainter. Professional and business jobs - one of the best-paying sectors - may be rolling over. That revisions appear to be becoming routinely negative is also not a good sign.

The two bright spots in the report were un- and under-employment, which declined (contra the trend I expect them to take, based on the YoY increase in initial jobless claims) and wages. Average wage gains of 0.5% and aggregate wage gains of 0.6% in a month are very good for workers. Almost certainly they will exceed the monthly inflation rate once again. Because of these two things, this was absolutely not anything close to a recessionary report. 

But the slowdown almost across the board in leading sectors is akin to another compartment of a sinking ship flooding. Still, I do not think we get a recession until goods producing jobs as a whole decline. At their current pace of deceleration, that would be in about 9 months.

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