If there was a “downside” to the July jobs report, it was probably just that the above-consensus print helped make the case for an accelerated Fed tightening timeline.
“Everything you could want and more,” read one bank’s summary of the numbers. Jason Furman delivered a comically glowing assessment. “I’ve yet to find a blemish in this jobs report,” he wrote, in a tweet. “I’ve never before seen such a wonderful set of economic data.”
That latter bit might be overwrought, but you’d have a hard time suggesting the numbers didn’t count as something akin to an “across-the-board” success, notwithstanding the remaining shortfall (5.7 million jobs) versus pre-pandemic levels of employment.
Read more: July Jobs Report Blows Through Estimates
Typically, “under-the-hood” postmortems are supposed to reveal the proverbial “cracks,” but as Furman suggested, there weren’t many.
Obviously, those obligated to put a bearish spin on the numbers will find a way — when you’re shackled to a specific editorial slant, you don’t have the leeway to deviate from it just because reality fails to play along. Fortunately, I don’t labor under such onerous constraints.
A quick run through the numbers shows that of the total unemployed, the percentage jobless for 27 weeks or more fell below 40% for the first time since January (figure below).
That’s still (wildly) high by historic standards, but all caveats aside, lower is better. The number of long-term unemployed fell by 560,000 last month, even as it’s still 2.3 million higher compared to pre-pandemic levels.
The number of permanent job losers dropped by more than a quarter million. It was the third consecutive monthly decline (figure below).
The total number of permanent job losers is still 1.6 million higher than February of 2020 but, again, we’re moving in the right direction.
The African American unemployment rate dropped a full percentage point, from 9.2% in June to 8.2%. That narrowed the gap by the most in more than two years (figure below).
I’d dryly suggest that there’s still quite “a ways” to go before we meet the “substantial further progress” threshold on that divide, though. Indeed, as Bloomberg noted, “behind the lower rates is a drop in participation for both Black men and women.”
On wages, it’s worth noting that leisure and hospitality gains were stupendous. On a 24-month, annualized basis, employees in the industry are experiencing 6.6% wage growth.
If you’re keeping score at home, employment in leisure and hospitality remains more than 10% below February 2020 levels (figure below).
The sector still needs to bring back some 1.7 million workers if it wants to claim a “full” recovery.
Of course, no (semi)granular NFP breakdown would be complete without an updated version of my restaurants and bars chart (figure below).
Fed jokes aside, that probably does count as “substantial further progress.”
As for inflation, ING had some good commentary Friday. “We’re of the view that labor supply will only improve gradually,” the bank’s James Knightley said. “With the summer vacation season still upon us, the issues with parents having to stay home to look after children is going to persist through to at least September,” he added, noting that “the rise of the Delta COVID variant could also mean that those workers who have been hesitant to return to work for health fears, further delay seeking employment.”
The longer labor supply remains constrained, the more scope there is for wage pressures to keep building. Knightley called it “a challenging situation for US companies with the implication being that we expect to see companies not only having to pay more to recruit new staff, but also raise pay more broadly in order to retain [them].”
