The U.S. labor market charged ahead in July with the biggest increase in employment in nearly a year, highlighting optimism about the economy’s prospects even as coronavirus concerns resurface.
Payrolls climbed by 943,000 last month after upwardly revised increases the prior two months, a Labor Department report showed Friday. The unemployment rate dropped to a pandemic low of 5.4%, while earnings and hours worked remained elevated.
The figures mark a big step toward the Federal Reserve’s goal of “substantial” further progress in the job market that will add fuel to the debate on how quickly officials should begin dialing back their bond buying.
At the same time, payrolls remain 5.7 million short of pre-pandemic levels, and a pickup in Covid-19 cases stemming from the delta variant poses a risk to the pace of job growth.
“This is a very strong report across all metrics,” Jeffrey Rosenberg, a senior portfolio manager at BlackRock Inc., said on Bloomberg Television. “There’s very little that you could point to here that’s disappointing.”
The median estimate in a Bloomberg survey of economists called for a 870,000 gain in payrolls. The dollar and 10-year Treasury yields advanced as traders bet a strengthening labor market will lead Fed officials to begin pulling back their bond buying program. Stocks were mixed.
Officials including Chair Jerome Powell and Governor Lael Brainard have indicated the labor-market recovery had some way to go before the central bank could begin tapering asset purchases.
Fed Governor Christopher Waller said this week that if the next two monthly employment reports show continued gains, he could back such a move.
“While there were some indications that labor constraints continued to ease, the rise in the delta variant clouds the outlook,” Wells Fargo & Co. economists Sarah House and Shannon Seery, said in a note. “Fed officials will likely be pleased with July’s progress, but we ultimately think they will want to see further ground recovered.”
What Bloomberg Economics Says…
“The July jobs report showed the labor market on track to meet ‘substantial further progress’ in coming months. Upward revisions lend an upbeat tone to a strong report, and strength extended well beyond education.”
— Andrew Husby, Eliza Winger and Niraj Shah, economists
Overall job growth in July was bolstered by a 220,700 seasonally adjusted gain in local education payrolls. The government attempts to smooth out the school-related dismissals that occur during the summer months. Because of smaller staffing levels this spring, the adjustment resulted in a larger July gain.
Friday’s figures showed a 703,000 increase in private payrolls, which was led by leisure and hospitality, which jumped by 380,000. Roughly two-thirds of the overall increase in July employment was due to job gains in local education and leisure and hospitality.
Other notable payroll gains were in health services, transportation and warehousing, manufacturing and business services.
Americans classified as long-term unemployed, or those who have been unemployed for 27 weeks or more, declined by 560,000 in July — the biggest drop on record.
The data offer validation for President Joe Biden’s efforts this year to approve almost $2 trillion in pandemic relief and widely distribute vaccines, amid signs that employers were having difficulty finding workers.
Even so, a stronger labor recovery could spur lawmakers to pare back Biden’s long-term proposal for trillions of dollars toward child care, education and other social measures.
The labor force participation rate — a measure of the share of Americans who are employed or looking for work — edged up to 61.7% in July but remained well below pre-pandemic levels.
In an effort to encourage unemployed Americans to look for work, roughly half of U.S. governors have ended federal unemployment benefit programs created during the pandemic before their official expiry in September.
Employers including Amazon.com Inc. and McDonald’s Corp., meanwhile, have been increasing wages and offering signing bonuses to lure workers. Average hourly earnings increased by 0.4% in July for a second month, the report showed.
- Employment-population ratio jumped to 58.4% in July from 58%
- The unemployment rate for White Americans fell to 4.8%, while the rates for Black Americans dropped to 8.2% and Hispanic Americans declined to 6.6%
- Average weekly hours held at 34.8
- The participation rate for women age 25 to 54 — the group most likely to have children — rose to 75.5%; the rate among men in that age group climbed to 88.3%
–With assistance from Kristy Scheuble, Sydney Maki, Sophie Caronello and Augusta Saraiva.