July’s easing of new hiring by 35% on a month-to-month basis was still increasing by enough so it cannot yet be considered an indication of an imminent recession. It was also not unexpected, especially after the much larger-than-projected growth in June than originally expected.
It also represented the 42nd month in a row of steady hiring for the country, continuing what is still the longest continuous hiring expansion in the last fifty years.
But by contrast this time, the 114,000 new hire number for July was unexpected on the negative side. A weighted forecast put together by FactSet before yesterday’s information was released suggested a far more robust level of 175,000 new jobs would be added to the payrolls.
Along with the decline in the rate of hiring, unemployment also rose slightly this month. The number of unemployed went up by 352,000 this time to a value of 7.2 million. That is a significant jump from June’s 4.0% figure. It is also 0.8 percentage points above the 3.5% value of a year ago.
And while some business categories grew by reasonable margins for July, employment growth this time was sluggish at best.
Health care topped the list of job creation categories this time, with 55,000 new hires. That is a little below the mean of 63,000 for this area over the last year, but still very much in line with this important component of the economy. Within the health care area, home health care services made the strongest contribution, with 22,000 new positions filled. Hospitals added 22,000 new people, and nursing and residential care facilities another 9,000.
The construction industry was the second largest contributor this time, consistent with the need for workers at what is typically one of the busiest times of the year for this industry. It brought on board 25,000 new positions, a number slightly above the 19,000/month average hiring trend since a year ago. Within this segment, special trade contractors led hiring, with an increase of 19,000 employees.
Transportation and warehousing rose in June by another 14,000. The couriers and messengers subsegment added 11,000 people and warehousing and storage an additional 11,000. While those areas showed solid gains, they were offset by an 11,000 loss in the transit and ground passenger transportation subsegment.
Social assistance came next in the rankings, with 9,000 new positions. That number was well below the average of 23,000 for this industry over the last twelve months.
Government employment was still steady in July with 17,000 new hires this time. That was well below June’s major surge of 70,000 new positions in this category last month, which was as expected since that involved some specific seasonal hiring changes at the time.
Employment in the information services category was the only major part of the economy which saw a significant decline in the month of July. It lost 20,000 jobs last month.
Other than these categories, job growth was flat in most other areas. Those included financial activities; leisure and hospitality, an area which had been growing steadily for some time; manufacturing; mining, quarrying, and oil and gas extraction; professional and business services; retail trade; wholesale trade; and the category of other services.
Hourly earnings increased last month by 8 cents per hour to a new high of $35.07. While still increasing, that represented just 0.2% growth versus the 0.3% increase the previous month.
Commentary
An important data point reported in this month’s summary from the Bureau of Labor Statistics is that the strong results previously reported for May and June were both adjusted substantially downwards this month, after full data was available.
May’s numbers were lowered from 218,000 to 216,000, and June’s were downgraded by 27,000 hires from the previous value reported of 206,000.
That could suggest even the current numbers may be ratcheted back a bit when final figures are available in a few weeks. But more important is that the trends are heading downwards steadily now, with July’s 114,000 numbers now well below the over 200,000 mean monthly hiring since July 2023.
Other factors suggest the declining job market may be more built in for the future. One is that the average workweek fell this time by another 0.1 hours to a new low of 34.2 hours this time. That is the lowest average work week in a decade.
Even with that, although unemployment rose this time by 0.3 percentage points from June, that rise rose primarily from short-term job losses rather than as part of a more significant decline for all. Much of that came from temporary layoffs, which rose by 249,000 to 1.1 million last month. Short-term cutbacks in employment were also up, by 30% from a month ago.
In contrast, the number of long-term unemployed in the country, those who have been looking for jobs for 27 weeks or longer, remained mostly unchanged at 1.5 million for the month. But that is both a substantial increase from July 2023’s total long-term unemployed of 1.2 million and could be a sign of things to come.
Economists were generally negative and concerned about this month’s hiring results.
Typical of the comments was one released by Lara Castleton, Janus Henderson Investor’s United States head of portfolio construction and strategy.
“The soft-landing narrative is now shifting to worries about a hard landing," she wrote in an email response to the latest Bureau of Labor Statistics release.
Joseph LaVorgna of SMBC Nikko Securities called out the “broad hiring trends clearly downshifting” as one of his group’s worries. He also called the jump in unemployment “even more troubling”.
That unemployment rise came after multiple earnings reports over the last weeks showing tech companies and similar enterprises missing their targets.
Stock markets yesterday expressed their disappointment with the hiring results by falling notably on multiple indexes. Nasdaq’s average dropped by 418 points yesterday, for a net loss of 4.2%. The broad market-based S&P 500 lost 1.8% of its total, for a decline of 100 points, and the Dow-Jones Industrial Average shed 611 points, amounting to a 1.5% loss.