The US economy added 157,000 jobs last month, while the unemployment rate ticked down to 3.9 percent, Friday’s jobs report from the Bureau of Labor Statistics revealed. The labor force participation rate remained unchanged over both the month and the year, at 62.9 percent. The number of workers re-entering the job market decreased by 287,000 in July to 1.8 million, after having increased in June, causing the unemployment rate to increase that month from 3.8 to 4.0 percent.
The manufacturing sector added 37,000 jobs in July, mostly in durable goods. Economists have been bracing for an impact on this sector caused by President Donald Trump’s recent changes to US trade policies, but these effects have not yet appeared in the BLS data. Other sectors with notable job growth last month included professional and business services (51,000 new jobs), health care and social assistance (34,000), food services and drinking places (26,000), and construction (19,000). The retail sector gained 7,000 jobs, with 32,000 job losses in sporting goods, hobby, book, and music stores offsetting gains in other types of retail establishments.
Those lost retail jobs may be the reason why the report failed to meet economists’ expectations of 190,000 new jobs, CNBC’s Patti Domm points out, possibly due to the bankruptcy of one major retailer:
“I blame it on Toys R Us,” said Grant Thornton chief economist Diane Swonk. Toy’s R Us closed the doors on more than 800 stores on June 29 after filling for bankruptcy. The company had been acquired by three investors in 2005, and was struggling with the associated debt. As for the jobs report, the miss was about the size of the loss of toy store related jobs.
Despite missing expectations, the report showed a steadily growing economy. Job growth figures for the preceding two months were also revised upward, from 244,000 to 268,000 in May, and from 213,000 to 248,000 in June.
The one bit of good news missing from the report was robust wage growth. Average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $27.05 in July, following a 5-cent rise in June, for a year-over-year increase of 71 cents or 2.7 percent. The BLS’s Employment Cost Index for the second quarter of 2018 showed that wages and salaries had increased 2.8 percent for the 12-month period ending in June 2018, an improvement over the 2.3 percent in the preceding year and the strongest gains since 2008, the Wall Street Journal reported when the index was released last week.
Still, that level of wage growth is barely enough to keep up with inflation, the New York Times notes in its coverage of Friday’s jobs report:
“People keep wondering when that magical kink will occur and wages will turn on a dime,” [Ellen Zentner, chief United States economist at Morgan Stanley,] said. Not yet, she predicted. Although the low unemployment rate has produced pockets of labor shortages, she said, “it’s not economywide.”
One reason is that plenty of workers still seem to be coming off the bench. For July, the participation rate was 62.9 percent, unchanged from June. … Simona Mocuta, senior economist with State Street Global Advisors … added that the dip in the unemployment rate without any corresponding upward pressure on wages suggested more slack in the labor market than the unemployment rate might otherwise suggest.