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The unemployment rate rose to 4.2 percent in July as the rate of job growth slowed to just 73,000 in the month. Perhaps more striking than July’s figure was the sharp downward revisions to the prior two months’ data, putting May and June job growth at 19,000 and 14,000, respectively. The average for the last three months now stands at just 35,000. Furthermore, all of the job growth was in health care, which accounted for 142 percent of the gains.

While the 4.2 percent overall unemployment rate is still relatively low by historical standards, Black workers have been disproportionately affected. Their unemployment rate rose to 7.2 percent, the highest since October of 2021, 2.4 percentage points above the low hit in April of 2023. The employment-to-population ratio for Black workers is down 3.6 pp from its peak in March of 2023.

The monthly data in the Household Survey are highly erratic, but employment has been dropping since April. It is down by 863,000 over the last three months with the overall EPOP down by 0.4 pp.

EPOP for Prime Age Workers Falls 0.3 PP in July

The EPOP for prime-age workers (ages 25 to 54) fell to 80.4 percent, 0.5 pp below last year’s peaks. The July drop for men was 0.5 pp, putting their EPOP 0.7 pp below the peak hit last July. The drop for women was 0.2 pp, putting their EPOP 0.7 pp below the all-time high last May.

Unemployment Rate Hits 10.0 Percent for Workers with Disabilities

The unemployment rate for workers with a disability rose by 1.8 pp from its year ago level. (These data are not seasonally adjusted.) This is the highest it has been in July since 2021 when it stood at 12.1 percent.

Unemployment Due to Quits Fell Sharply

Another negative sign in this report is that the share of unemployment due to voluntary quits fell by 1.1 pp to 10.7 percent. It averaged 13.2 percent in 2018-19, when the unemployment rate was comparable to the current level.

Employment of Foreign-Born Down Year Over Year

Employment of foreign-born workers, which is not seasonally adjusted, is down by 237,000 over the last year. This is the first month with a reported YOY decline.

College Grads and Young Workers Continue to Fare Poorly

The unemployment rate for college grads edged up to 2.7 percent the highest since August of 2021. Their EPOP fell in July to 69.6 percent, the lowest since March of 2021.

The unemployment rate for workers between the ages of 20-24 fell 0.3 pp to 7.9 percent, but this is still 2.4 pp above the low hit in April of 2023. Their EPOP was steady at 65.3 percent, 2.9 pp below the peak hit in January of 2024.

Self-Employment is Down Sharply

The data on self-employment are highly erratic, but both incorporated and unincorporated self-employment is down sharply from the year-ago level. The former is down by 150,000, while the latter is down by 240,000.

Health Care Sector Adds 55,400 Jobs, Accounts for All the Job Growth Over the Last Three Months

The concentration of job growth in the health care sector is striking, with all other sectors collectively losing jobs over the last three months. While job growth is not plummeting in any major sector, the weakness outside of health care is notable.

Manufacturing lost 11,000 jobs in July and is now down 37,000 jobs since April. Construction did a little better, adding 2,000 jobs in July, the same as its average over the last four months. Restaurants lost 300 jobs in July, leaving employment in the sector just 1,800 higher than in December. Scientific research lost 1k jobs in July, down 11.1k since January, or 1.2 percent of total employment. Even coal mining shed jobs, losing 400 in July, 1.0 percent of total employment.

Retail was the only major sector outside of health care adding jobs in the month with a reported gain of 15,700, but this mostly reversed a reported decline of 14,300 in June.

The big gains reported in employment in June for state and local government education were largely revised away. They now stand at just 7.5k for June. Employment fell by 11.6k in July.

Wage Growth Continues to Run Below the 2023-2024 Pace

The annual rate of wage growth during the last three months (May, June, July) compared with the prior three months (Feb, March, April) is 3.7 percent, down from 4.0 percent in 2023 and 2024. Slower wage growth, coupled with rising inflation, means lower real wage growth.

The average hourly wage for non-supervisory workers in restaurants rose at just a 2.5 percent annual rate comparing the last three months with the prior three months. These are the lowest paid workers and their pay tends to be very responsive to labor market conditions.

Revisions Make July Report Very Bad News

It is unusual that we get revisions to prior months’ data that so drastically change our picture of the state of the labor market. The last two months’ data had shown some evidence of slowing, especially with the large share of employment growth for June coming in state and local government education. However, with these revisions there can be little doubt that the labor market is slowing sharply with both the establishment and household surveys telling the same story.

The establishment survey is showing negative net job growth outside of the health care sector. There is no major sector showing any real sign of strength. Wage growth is also slowing modestly, with a sharp slowing in restaurants, the most sensitive sector.

The household survey shows an actual decline in employment over the last four months. These data are highly erratic, so that drop should not be accepted at face value, but we can be safe in assuming employment is not growing rapidly.

Some of this is by design. The Trump administration’s deportation efforts are quite explicitly intended to reduce the number of foreign-born workers in the country, and the data seem to indicate they are having that effect. However, if there is supposed to be a payoff for native-born workers from these policies, we are not seeing the evidence at this point. 

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