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Employment Again Rises Sharply in July

The Labor Department reported the economy added 255,000 jobs in July.

The EPOP ratio for prime age workers (ages 25–54) is up by 0.9 percentage points in the last year, but still 2.5 percentage points below its pre-recession peak.

The Labor Department reported the economy added 255,000 jobs in July. With the June number revised up to 292,000, the average for the last three months now stands at 190,000. The household survey also showed a positive picture, with employment rising by 420,000. With new people entering the labor force, the employment-to-population ratio (EPOP) edged up by 0.1 percentage point to 59.7 percent, while the unemployment rate remained unchanged at 4.9 percent.

The job gains in the establishment survey were broadly based. Health care added 43,200 jobs, just slightly above its 39,700 monthly pace over the last year. The professional and technical services added 37,400, well above its average pace of 23,800 over the last year. The government sector added 38,000 jobs. Much of the growth was due to state and local education, which added 26,700 jobs in July. This growth is likely in part due to timing, with many schools starting earlier and having teachers begin preparations in July.

Restaurants added 21,200 jobs, a bit less than the 25,000 average for the last year. One anomaly was an increase of 10,000 jobs in performing arts and spectators sports. Job growth in the sector has been strong the last three months, with employment now 5.0 percentage points above its March level.

Construction and manufacturing added 14,000 and 9,000 jobs respectively. Most of the increase in manufacturing employment was due to a 6,700 increase in jobs in autos. While sales have been strong, this may also reflect changed seasonal patterns for retooling. Mining continues to lose jobs, shedding another 6,100 in July.

Other news in the establishment survey was also positive. The length of the average workweek edged up by 0.1 hours leading to an increase in the index of aggregate weekly hours of 0.5 percent. There also is some evidence of more rapid wage growth. The year-over-year increase in the average hourly wage was 2.6 percent. The annual rate comparing the average for the last three months with the prior three months was 2.8 percent. If this continues, workers will be able to get back some of the share lost to profits in the downturn.

While the household survey is mostly positive, there are some aspects that continue to suggest labor market weakness. The duration measures of unemployment all increased in July, with the average duration of unemployment spells rising from 27.7 weeks to 28.1 weeks and the median from 10.3 weeks to 11.6 weeks. These durations are more consistent with a recession than a strong labor market.

Similarly, the number of people involuntarily working part-time rose slightly to 5.94 million. This followed a sharp drop in June, but it is nonetheless quite high for a labor market with an unemployment rate of 4.9 percent. Also, the percentage of unemployment due to voluntary job leavers remained at 10.7 percent. This compares with peaks of more than 12.0 percent before the recession and over 15.0 percent back in 2000.

One interesting note is that the least educated workers appear to be the biggest beneficiaries of recent job growth. The EPOP ratio for workers without high school degrees rose by 2.1 percentage points for the month and is 1.6 percentage points above its year ago level. The unemployment rate for this group is 1.9 percentage points below the year ago level. By contrast, the EPOP ratio for college grads is down by 0.5 percentage points from its year ago level while the unemployment rate is unchanged. The unemployment rate for workers with just a high school degree fell by 0.5 percentage points over the last year.

One positive item in this report is a sharp drop in black teen unemployment from 31.2 percent to 25.7 percent. These data are highly erratic, but the June level was a sharp reported rise from a low of 23.3 percent in February.

This is mostly a very positive report. In addition to the strong growth in jobs in the establishment survey, the household survey also showed a large jump in employment. The increase in hours, coupled with some evidence of more rapid wage growth, add to the positive picture. The labor market still has some way to go to fully recover, but it is making progress.