US Jobs: Everything You Could Want And More

 The US jobs market has posted a solid set of figures for July with employment gains exceeding expectations, unemployment falling, wages accelerating and the participation rate increasing. Momentum is building toward early Federal Reserve policy action.

Jobs & wage gain boost case for stimulus withdrawal

The US economy saw 943,000 jobs created in July, well above the 870,000 consensus forecast with an extra 119,000 jobs added through upward revisions to recent history. Private payrolls rose 703,000 with leisure and hospitality recording a 380,000 rise, trade and transport was up 47,000 and manufacturing increased 27,000. There was also good news for construction, which posted an increase in employment after three consecutive falls. Government workers increased by 240,000 with the only disappointment coming in retail, which saw 6,000 job losses.

This broad strength was also reflected in the household survey used to calculate the unemployment rate. It showed a 1.043mn increase in the number of people classifying themselves as employed. There was also a slight increase in worker participation which has left the unemployment rate at 5.4% versus 5.7% in June.

Rounding out a really strong set of figures we have wage growth of 0.4% month-on-month/4% year-on-year, a tenth of a percentage point higher than expected. With more people in work and at higher rates of pay this means the outlook for household incomes is very positive, which should help to keep household spending motoring along.

Nonetheless, we have to remember that total US non-farm payrolls remains 5.702mn below the pre-pandemic level of February 2020. Last week’s GDP report showed the economy has already made back all the lost output but, there is still some way to go before the labour market has fully healed.

US non-farm payrolls levels (mn)

Source: Macrobond, ING

Labour supply still holding back the recovery

That said, the slower pace of the jobs recovery remains a supply side issue, not a demand side problem. The most recent Federal Reserve Beige Book stated that “labour shortages were often cited as a reason firms could not staff at desired levels… All Districts noted an increased use of non-wage cash incentives to attract and retain workers. Firms in several Districts expected the difficulty finding workers to extend into the early fall.”

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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