The Employment Situation in July – Unemployment Rate Flat, Builders Too

It was a good month for the labor force, builders not so much. The labor force and payrolls expanded smartly but recent gains have been tilted to the service sector while employment producing goods and homes has been flat.

The Bureau of Labor Statistics (BLS) reported payroll employment rose by 255 thousand in July, the labor force expanded by 407 thousand and the unemployment rate was unchanged at 4.9%. Payrolls for May and June were revised upward by a total of 18 thousand.

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Solid gains in payrolls and the labor force are welcome signs of renewed strength after a soft spot in April and May. But the largest job gains so far in the recovery have been concentrated in lower paying service sectors. Payroll employment in the service sector overall is nearly 10% above prerecession peaks. Employment in the education, healthcare, and leisure and hospitality sectors is 15% to 20% above previous peaks. Higher paying jobs, like manufacturing and home building, are still below prerecession peaks, 90% and 85% respectively, and have leveled off recently. Average hourly earnings rose 2.6% over the twelve months ending in July, a high point since the downturn, but still low compared to the 4% gains in previous economic cycles.

Payrolls and the labor force are expanding at healthy levels, and the unemployment rate is in the range considered normal for a dynamic labor market. Ongoing improvement in the labor market will be measured by the quality of jobs created.

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