Payrolls Jump and the Unemployment Rate Hits Pandemic Low

Hiring rose at the fastest pace in almost a year, according to the latest payroll report from the U.S. Bureau of Labor Statistics. Nonfarm payrolls jumped 943,000 in July, and the unemployment rate fell from 5.9% in June to 5.4% in July.

Benefiting from the reopening, leisure & hospitality led the way, adding 380,000 net new jobs. Restaurants and bars added 253,000, which is included in the 380,000. 

Public education also had a strong showing, with 230,000 new jobs. However, the U.S. BLS said “Pandemic-related staffing fluctuations,” which “likely contributed to job gains in July,” may have overstated gains in education.

The graphic below is a 3-month moving average of the monthly change in nonfarm payrolls. The moving average helps to smooth away some of the statistical noise that sometimes accompanies the monthly number.

Note the acceleration since the beginning of the year, as strong consumer and business demand, the reopening, and the need to bulk up on staffing have boosted growth.

The payroll survey was taken before the recent surge in Covid cases, and the Delta variant may be a concern. Might the variant dampen some of the economic momentum? While we’ve seen some day-to-day volatility in stocks, currently, the collective view among investors suggests the variant isn’t a big threat to the economic expansion.

Barring a significant surge in new restrictions, July’s upbeat report increases the odds the Fed will start winding down its monthly $120 billion in bond buys later in the year.

If there is a fly in the ointment, those not in the labor market (not working AND not looking for work) remain 5 million below the pre-pandemic level, per the U.S. BLS. About 20% of those are 55 years of age or older, which suggests early retirement or a fear of contracting Covid in the workplace may be partly to blame.

Meanwhile, some states have already curtailed generous jobless benefits. For others, the slated end is early September, which may encourage some to seek employment more forcefully. This is not meant to be political or a criticism. We are incented to do what we do. Some folks are just acting in their own self-interest, since being on the sidelines may be more financially beneficial.

Created 2021-08-09 14:49:27