Perspective On The Employment Release

Some observations: (1) The blockbuster number (943 K vs 870K fm Bloomberg) has to be kept in perspective, as NFP employment is far below trend, (2) high contact intensive services employment was recovering quickly through the reference period before the delta variant surge, (3) both average nominal wages and aggregate hours continued to rise, and (4) average real wages likely stabilized in July, at about 1.5% above 2016-19 trend.

Figure 1: Nonfarm payroll employment, seasonally adjusted (bold blue), seasonally unadjusted (light blue), Bloomberg consensus of 8/5 (teal +), 2016-19 stochastic trend (red), all in 000’s. NBER defined recession dates shaded gray. Source: BLS, Bloomberg, NBER and author’s calculations.

Despite the large number, employment in the big picture does not look much above expected (from the Bloomberg consensus) and remains 5.7 million shy of peak (3.8% in log terms). Employment is 5.8% below the 2016-19 trend. Note that the seasonally adjusted and not seasonally adjusted series agree on the levels of employment, as do the 12-month percentage changes.

The sectoral distribution of growth is also remarkable. Manufacturing continues to grow as it has, after a couple of hiccups, but accommodation and food services have really staged a comeback – at least through the 2nd week of July (the reference period).

Figure 2: Manufacturing employment, (dark blue), accommodation and food services (red), all seasonally adjusted, in 000’s. NBER defined recession dates shaded gray. Source: BLS, Bloomberg, NBER and author’s calculations.

Nonetheless, accommodation and food services employment remains 9.7% (1.3 million) below peak, while manufacturing employment is only 3.4% below (433 thousand). And this is before the impact of the delta variant was being felt in terms of risk averse behavior in high contact activities, occurring toward the end of July.

Aggregate weekly hours continued its climb, and hence too did (composition unadjusted) average hourly earnings.

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