Last Friday (August 4, 2023), the U.S. Bureau of Labor Statistics (BLS) released the latest labor market data—— Employment Situation Summary – July 2023 – shows a rather “stable” result. Compared with early 2023, the employment outlook has weakened slightly, but the overall situation is very stable. There is no sign of a recession, or that the Fed’s misguided rate hikes are causing unemployment to rise. More evidence that monetary policy is not an effective tool.
For those who are confused about the difference between wage (institutional) data and household survey data, you should read this blog post – The state of the US labor market is worrying – I explained the differences in detail.
Some months have smaller differences, while others have larger differences.
Salary Employment Trends
The Bureau of Labor Statistics states:
Nonfarm payrolls rose by 187,000 in July, below the 312,000 monthly average for the previous 12 months. In July, job gains in health care, social assistance, financial activities and wholesale trade…
The health care industry added 63,000 jobs in July, compared with the 51,000 monthly average for the prior 12 months…
Social assistance added 24,000 jobs in July, in line with the 23,000 average monthly gain in the prior 12 months…
Employment in financial activities rose by 19,000 in July. After employment was largely flat in the first quarter, the industry added an average of 16,000 jobs per month in the second quarter of this year…
Employment in wholesale trade rose by 18,000 in July, marking little net change in recent months.
Employment in other services continued to trend upward in July (+20,000), compared to a monthly average of 15,000 over the past 12 months…Other services employment remains below pre-pandemic levels in February 2020 , a decrease of 53,000, or 0.9%.
Construction employment continued its upward trend in July (+19,000), in line with the average monthly gain of 17,000 over the previous 12 months…
Employment in leisure and hospitality was little changed in July (+17,000). Employment in the sector has been little changed in recent months, following a monthly average of 67,000 in the first quarter of the year…
Employment in professional and business services was little changed in July (-8,000). The industry has added an average of 38,000 jobs per month over the past 12 months…
Employment in other major industries was little changed this month…
All told, 472,000 net wage jobs were created in January 2023, but the shift has declined over the past 3 months.
While there are no signs of a looming recession, job creation on average per month is down significantly from 2022 on a net basis.
The first graph shows the monthly change in wage employment (in thousands, expressed as a 3-month moving average to remove monthly noise). The red line is the annual average. Observations between January 2020 and January 2020 were excluded as outliers.
You can see that the population surged after the initial COVID-19 restrictions, but has slowed significantly over the past two years.
The next graph shows the same data in a different way – in this case, the graph shows the average monthly net change in wage employment (real) over the calendar years 2005 to 2023.
The red marks on the columns are the results for the current month.
Average monthly change – 2019-2023 (000s)
| Year | Average Monthly Employment Change (000s) |
| 2019 | 163 |
| 2020 | -774 |
| 2021 | 606 |
| 2022 | Chapter 399 |
| 2023 (present) | 258 |
Labor force survey data – Employment rises by 273,000, unemployment falls
Seasonally adjusted data for July 2023 shows:
1. Labor Force Survey total employment decreased net by 268,000 (0.17%) – similar to last month.
2. The net increase in the labor force was 152,000 (0.09%).
3. The participation rate remained unchanged at 62.6%.
4. As a result (from an accounting perspective), the measured total unemployment rate fell by 116,000 to 58.41 million and the official unemployment rate fell by 0.1 percentage point to 3.5% (rounded).
The chart below shows monthly job growth since January 2008 and excludes extreme observations (outliers) from July to January 2020 that distort the current period relative to the pre-pandemic period Case.
The employment-to-population ratio is a good indicator of the strength of the labor market because the denominator, population, is not particularly cycle-sensitive (unlike the labor force), so movements are relatively well-defined.
The graph below shows the US employed population from January 1950 to July 2023.
In July 2023, the ratio increased by 0.1 percentage point to 60.4%.
The peak in July 2020 before the outbreak was 61.1%.
Trends in unemployment and underutilization
The U.S. Bureau of Labor Statistics states:
The unemployment rate was 3.5% in July, with 5.8 million unemployed people, little changed. Since March 2022, the unemployment rate has been between 3.4% and 3.7%.…
The number of long-term unemployed (unemployed for 27 weeks or more) was little changed in July at 1.2 million, or 19.9% of all unemployed…
The number of people working part-time for economic reasons was little changed at 4 million in July. These are individuals who would have preferred to work full-time but have taken part-time work because of reduced hours or the inability to find full-time employment.
All around smooth.
A slight reduction in hours worked last month was reversed this month.
The first graph shows the official unemployment rate since January 1994.
official unemployment rate narrow Measures of labor waste, which means that strict comparisons to the 1960s, such as the tightness of the labor market, must take into account broader measures of labor underutilization.
The figure below shows the BLS metric U6, which is defined as:
Total unemployment plus all marginally dependent workers plus total employment part-time for economic reasons as a percentage of all civilian labor force plus all marginally dependent workers.
As such, this is the broadest quantification of labor underutilization published by the Bureau of Labor Statistics.
Before the outbreak of the new crown epidemic, the proportion of U6 was 6.8% (January 2019).
In July 2023, the U6 indicator is 6.7%, down 0.2 percentage points. It has been below 7% since August 2022.
This month’s drop was driven by a decline in “employment for economic reasons,” the U.S. category of underemployment based on hours worked.
How is wage growth in the US?
The U.S. Bureau of Labor Statistics reports:
Average hourly earnings for all private nonfarm payrolls rose 14 cents, or 0.4%, to $33.74 in July. Average hourly earnings have increased 4.4% over the past 12 months. Average hourly earnings for production and nonmanagement workers in the private sector rose 13 cents, or 0.5%, to $28.96 in July.
Newest – BLS Actual Earnings Summary – June 2023 (Published 12 July 2023) – Tell us:
On a seasonally adjusted basis, real average hourly earnings for all employees increased 0.2% from May to June…the result was driven by a 0.4% increase
Average hourly earnings rose 0.2 percent, and the consumer price index for all urban consumers (CPI-U) rose 0.2 percent.Real average weekly earnings rose 0.5% sequentially due to a change in real average hourly earnings and a 0.3% increase in average weekly hours worked.
From June 2022 to June 2023, real average hourly earnings increased by a seasonally adjusted 1.2%.
Overall, inflationary pressures are easing rapidly, with nominal wage growth starting to lead to modest increases in real wages. This is a good sign. But there has been no apparent major breakout in wages.
The table below shows the change in nominal average hourly earnings (AHE) by industry and inflation-adjusted AHE by industry in July 2023 (note that we are using June CPI (the latest available) for the adjustment) .
However, some industries still did not enjoy the modest increase in real wages that others did.
The chart below shows the annual growth rate in real average hourly earnings from 2008 to July 2023.
Another indicator that tells us whether the labor market is turning in favor of workers is the quitting rate.
The latest data from the U.S. Bureau of Labor Statistics (BLS) – Summary of Job Openings and Labor Turnover (Published July 6, 2023) – states:
The number of job vacancies was little changed at 9.6 million on the last working day of June…Hirings and total departures fell to 5.9 million and 5.6 million respectively for the month. In terms of departures, resignations (3.8 million) decreased, while layoffs and layoffs (1.5 million) changed little…
In June, the number of quitters and quit rate fell to 3.8 million (-295,000) and 2.4%, respectively.
As a result, in June 2023, the resignation rate decreased slightly and job vacancies remained largely stable.
in conclusion
In July 2023, the latest US labor market data showed fairly “stable” results.
Compared with early 2023, the employment outlook has weakened slightly, but the overall situation is very stable.
There is no sign of a recession, or that the Fed’s misguided rate hikes are causing unemployment to rise.
More evidence that monetary policy is not an effective tool.
Enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
