- Non-farm payrolls rose by 164k in July, right in line with expectations for 165k. May and June hiring were revised down 41k, modestly weakening the recent trend in hiring.
- Both goods and services hiring slowed. Goods-producing employment rose 15k, driven by an acceleration in manufacturing job gains (+16k). Services employment, meanwhile, rose 133k. Notable gains were seen in professional and technical services (+31k), health care (+30k), social assistance (+20k) and financial activities (+18k).
- The unemployment rate remained unchanged at 3.7%, against an expectation for a one tick drop, as participation in the labor force rose to 63.0%. That is the second month in a row that headline participation rose, and is a good sign that a strong job market is drawing more people into the workforce, or keeping them there rather than retiring.
- One positive surprise was a 0.3% monthly increase in average hourly earnings. That took the trend for growth over the past year back up to 3.2% (from 3.1%).
Key Implications
- Overall today’s report was a pretty decent one. Headline payrolls growth continues to slow on a trend basis, but that is not unexpected. Either by a three or six-month moving average, trend hiring has cooled from over 200k per month pace to 140k. We expect this trend to continue in the months ahead, as spare workers get tougher to find.
- That is not to say that they aren’t out there. As we discuss in our recent report, by many metrics the job market is not really that tight. And this is a big part of why wage gains haven’t been so hot. At recent trends it could take over two more years before we get back to the sort of labor market that prevailed during the 2000 tech boom.
- Chair Powell made it clear in his press conference that he is not worried about the labor market overheating, and there are few signs of that in the July data. It is yesterday’s announcement that the U.S. will levy another 10% tariff on the remaining Chinese imports not subject to tariffs that the Fed was afraid of. With the risks increasingly becoming reality on that front, we expect the Fed will cut again in September.
