July 2021 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm employers added 943,000 jobs in July (exceeding consensus expectations of 900,000). May and June employment changes were revised up by a combined 119,000 (May: +31,000; June: +88,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) fell by 0.5 percentage point, to 5.4%, as gains among the employed (+1.043 million) were nearly four times greater than the increase in the civilian labor force (+261,000). 

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Observations from the employment reports include:

* Goods-producing industries gained a rather miniscule 44,000 jobs; service-providers: +899,000. Notable job gains occurred in leisure and hospitality (+380,000), in local government education (+220,700), and in professional and business services (+60,000); only retail trade showed a loss (-5,500). Manufacturing added 27,000 jobs. That result is consistent with the change in the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which expanded in July. Wood Products employment rose by 1,400 (ISM fell); Paper and Paper Products: -600 (ISM rose); Construction: +11,000 (ISM rose).

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* The number of employment-age persons not in the labor force declined slightly (-130,000) to 100.1 million. Consequently, the employment-population ratio (EPR) rose to 58.4%; i.e., nearly six out of 10 in the employment-age population are presently employed. 

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* Because the civilian labor force expanded by 261,000 in July, the labor force participation rate inched up 61.7%. Average hourly earnings of all private employees increased by $0.11 (to $30.54), and the year-over-year increase jumped to +4.0%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.11, to $25.83 (+4.7% YoY). Since the average workweek for all employees on private nonfarm payrolls was unchanged at 34.8 hours, average weekly earnings increased by $3.83, to $1,062.79 (+4.6% YoY). With the consumer price index running at an annual rate of +5.4% in June, even those who are employed are -- on average – not keeping up with the official inflation rate.

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* Full-time jobs jumped (1.265 million) to 127.5 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work – dropped by 144,000, whereas those working part time for non-economic reasons slid by nearly 250,000; multiple-job holders retreated by 83,000.

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For a “sanity test” of the job numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in July fell by $24.8 billion, to $216.5 billion (-10.3% MoM; +11.3% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending July was 20.2% above the year-earlier average.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.