U.S. Jobs: July Employment Report Comes Up Roses

If ever there were a situation that underscores the value of timely intelligence, it's the employment situation summary for July 2021. Released earlier today it reflects data that's gathered in the middle of the preceding month. And what that data reports is unambiguously positive and encouraging.

Unfortunately, it completely misses the massive pandemic surge over the past two-to-three weeks, which will inevitably play into next month's report. Before speculating about what lies ahead, let's bask in the data from the latest report for a moment of uplift and celebration, shall we?

Bigger, Better Numbers Than Expected or Forecast

I cringed earlier this week when I heard a news item that employment numbers in this latest report might be as low as 300,000 jobs added. In addition, the consensus forecast for the July unemployment number came in at 5.8 percent. Based on June numbers (5.9 percent unemployment, 9.48 million unemployed persons), this equates to about 160,000 jobs for each one-tenth of a percentage point involved.

That makes a 0.4 swing lower than the consensus forecast worth about 480,000 jobs. Now that's what I call a pleasant surprise, and it shows more strength in job growth than labor economists actually anticipated. The other good news came from upward revisions to May and June jobs added numbers: May went up by 31,000 jobs — from 583,000 to 614,000 — while June added 88,000 jobs, blowing up from from 850,000 to 938,000.

That puts the three-month period average over 800,000 (nearly 832,000, in fact), which is the best the economy has managed over the past 13 months. It's hard not to see some sunshine and rainbows, at least right here andright now.

Most population cohorts have also experienced decreasing unemployment of late, except for Asian-Americans (steady at 5.3 percent) and teenagers (ditto, but at a much higher 9.6 percent). Even the numbers for temporary layoffs and long-term unemployed have decreased, though overall labor force participation remains little changed (and has fallen in a narrow band from 61.4 to 61.7 percent since June 2020).

Where Growth Happened

Once again, it's mostly the "usual suspects" that experienced the highest growth for July 2021. These include the following:

Leisure and hospitality added 380,000 jobs, of which 253,000 are in food services and drinking places, 74,000 in accommodations, and 53,000 in recreation. The sector remains down by 1.7 million jobs (10.3 percent) relative to February 2020 levels.

Local government and private education added 221,000 jobs and 40,000 jobs, respectively. Compared to February 2020, they remain down by 205,000 jobs (government education) and 207,000 jobs (private education).

Professional and business services added 60,000 jobs, of which 43,000 are in the professional and technical services component. Overall, the segment is down by 556,000 compared to February 2020.

Transportation and warehousing added 50,000 jobs, of which 19,000 are in ground passenger transport, 11,000 in warehousing and storage, and 8,000 for couriers and messengers. It remains down by 575,000 jobs vis-�-vis February 2020.

Other services added 39,000 jobs (still down by 236,000 from February 2020).

Healthcare added 37,000 jobs (still down by 502,000 from February 2020).

Manufacturing added 27,000 jobs (still down by 433,000 from February 2020).

Information added 24,000 jobs (still down by 172,000 from February 2020). Our home sector hasn't appeared in the added column for some time now, but it has also been much less affected by job losses than any of the other sectors, save for Financial activities (shown next in the list).

Financial activities added 22,000 jobs (still down by 48,000 since February 2020).

Mining added 7,000 jobs (still down by 103,000 from its January 2019 peak)

Retail was the only losing sector, shedding 7,000 jobs for the month, though gains at gas stations, miscellaneous store retailers, and nonstore retailers offset losses at building materials and garden supply stores. Overall, this sector is down by 270,000 jobs compared to February 2020.

The only two sectors that stayed relatively flat were construction and wholesale trade. July thus also has the distinction of the most jobs added across the most sectors since August 2020. Average hourly earnings were also up by $0.11 to $30.54, continuing a string of increases into a fourth month. Of course, inflation is also up sharply: at 5.4 percent for June, its at its highest level since August 2008.

The Elephant in the Room: The Delta Variant

Alas, these impressive and positive numbers may only be short-lived. Most economists (see discussion in this Washington Post story) are convinced that the next one or two employment reports can't help but show some retrenching in light of recent spikes in infection levels.

That said, new weekly claims for unemployment continue flat over the past few weeks, but are double pre-pandemic levels. As always, things can go either way, so a lot depends on how local governments react to increasing spread of the virus, and handle upcoming school openings.

Stay tuned: It's bound to be an interesting ride, as always.