U.S. Jobs: July Yields Quirky Employment Outlook

It's the first Friday of August. Thus also, it's time to download, digest, and interpret July 2018's Employment Situation Summary from the U.S. Bureau of Labor Statistics. This time, we get a bit of a curve ball as, counterintuitively, both jobs creation and unemployment go down.

With only 157,000 jobs created for July, that's off the mark considerably from the two previous months, both also revised upward in this latest report. May jumped to 248,000 jobs, and June to 268,000 jobs, so that even with a lackluster 157,000 jobs added in July, the three month average remains more than 200,000 at a still tolerable 224,000.

As Martha Gimbel, Director of Economic Research at Indeed.com observed — from a New York Times story this morning — this average monthly figure for May, June, and July handily improves over 2016's average (181,000) and 2017's number (184,000) by more than 20 percent.

Gimbel is quoted as saying, "It is amazing that at this point in a recovery you are seeing growth that is on average faster than the previous two years." The slight 0.1 percent slide in unemployment is easily explained by a dip of 287,000 in the number of persons re-entering the workforce (a rise in which explained the preceding month's equally slight jump to 4 percent).

Where The Growth Happened in July

July's gainers include some steady member sectors, including a few seeming surprises (but not really, as I'll explain). Professional and business services has been on a tear all year long. Up by 51,000 jobs in July, it's also up by 518,000 for the preceding 12-month period (average: 43,000 jobs per month).

Manufacturing is still adding jobs (the consensus take is that the looming trade war, such as it is, hasn't hit hard enough yet to negatively impact manufacturing). It gained 37,000 jobs for July, with a 325,000 gain for the preceding 12 months (average: 27,000 jobs per month). Together, these two sectors alone account for just over half of July's gains.

Other winning sectors for the month include: health care and social assistance (another perennial evergreen), up by 34,000; food and beverage services, up by 26,000, construction, up by 19,000 (with a trailing 25,000 monthly average for the past 12 months, so down a bit from that number); and retail up just a hair at 7,000 jobs added.

The remaining sectors were all pretty much flat, including mining, wholesale trade, transportation and warehousing, information, financial activities, and government.

Also more or less flat: the still-stagant rate of wage growth. As with overall job growth, "maddeningly slow but steady expansion" remains the watchword here, as average hourly wages crept upward by $0.07 an hour to $27.05. That's in line with overall modest 2.7 percent growth over the past 12-month period.

A Closer Look at Information

According to CompTIA what the U.S. Bureau of Labor Statistics calls the Information sector accounts for about 45 percent of all information technology-related jobs in the United States. All other IT jobs fall outside the information sector, and largely represent how the IT function is faring in all the other economic sectors.

Thus, you can roughly double the numbers I'm about to relate for a sense of the entire IT jobs market here in the United States. In July 2018, 114,000 unemployed persons in Information represented an unemployment rate of 4.2 percent. Do the math and that puts the size of this sector at 2.7 million. (CompTIA sizes the entire sector at around 8 million or 9 million jobs, so it looks like you need to multiply by 3.2 or 3.3 to size it for the whole economy writ large.)

For 2017, those numbers were 111,000 and 4.3 percent, respectively. The 2017 sector size computes to 2.6 million. Thus, we see sector growth of 0.13 million or 130,000 jobs over the past year. That's a good sign, and something I expect to see more of in the months ahead.

Is It a Hiccup, or a New (Downward) Trend?

What's potentially worrisome here is the dip of 111,000 jobs from the preceding month's revised 268,000 figure to get to 157,000 jobs for July. If you like the smoothing effects of an average, the dip is still 77,000 jobs from the three-month average of 224,000. Is it a blip kind of dip — just a hiccup, in other words — or is this the beginning of a new trend?

I don't think it is, but only time will tell. Stay tuned for next month's thrilling report, when we'll see how close to "normal" the August numbers turn out. Then we can figure out whether the old normal persists, or a new normal is starting to assert itself.