The U.S. economy added 943,000 jobs in July, while the unemployment rate dropped to 5.4%, according to the U.S. Bureau of Labor Statistics.
Notable job gains occurred in leisure and hospitality, local government education, and professional and business services.
As of the end of the month, about 8.7 million Americans were unemployed – a decrease of 782,000 compared with June.
The labor force participation rate was little changed at 61.7%, which is 1.6 percentage points lower than in February 2020.
Wages continued to increase. In July, the average hourly rate for all employees on private non-farm payrolls increased by 11 cents to $30.54, following increases in the prior three months.
Average hourly earnings for private-sector production and nonsupervisory employees also rose by 11 cents in July to $25.83.
The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages. However, because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earnings, the BLS notes.
The emergence of new variants of the COVID-19 virus that can potentially punch through the defense of vaccination has resulted in a murky picture for the labor market. Although there have been significant job gains in leisure and hospitality in recent months, the rate of improvement has been slowing, as fewer people venture out to eat at restaurants and see shows.
In addition, many Americans continue to collect unemployment under COVID relief plans while others have been slow to return to work. As a result, there has been an explosion of job openings.
“The U.S. economy added 943,000 jobs in July, which means that nearly 75 percent of the jobs lost at the start of the pandemic have been recouped,” says Odeta Kushi, deputy chief economist for First American, in a statement. “At this monthly pace, we would return to the pre-COVID employment peak by February 2022.
“According the May JOLTS report, job openings soared to a record 9.21 million, while total hires decreased to 5.93 million, resulting in job openings exceeding hires by a record 3.28 million,” Kushi says. “This indicates that as of May, there remained a mismatch between labor supply and labor demand.
“One way to track the supply of available workers is the labor force participation rate, the share of the population working or seeking work, which as of July remained 1.6 percentage points below its pre-COVID rate,” Kushi says. “Prior to this recession, the last time the labor force participation rate was this low was in 1977. The participation rate for older workers (age 55 & older) has shown no progress since the worst of the pandemic-driven decline in May 2020. Some of this decline may be temporary, some is likely to remain permanent as the pandemic drove many older workers to retire early.
“The decline in the participation rate for prime-age workers (25-54) fell more than for older workers at the onset of the pandemic because the hardest hit segments of the economy were more likely to employ younger workers,” Kushi explains. “The prime-age LFPR remains below the pre-COVID level of appx 83 percent. As of the July jobs report, the rate is 81.8 percent as there are still 1.19 million fewer prime-age workers either employed or looking for employment than there were in February 2020. We need this to rise further.”
Photo: Saulo Mohana