U6 Fix
August 2, 2024
Jobs Slowdown Adds to Fed Rate Debate
Job growth in July slowed more than expected as employers added just 114,000 new workers to their payrolls. Data for May and June were downwardly revised to show 29,000 fewer jobs created during those months than previously reported. The unemployment rate jumped to 4.3 percent, the highest level since October 2021. At the FOMC meeting that concluded Wednesday, the Fed Chairman Jerome Powell teed up a possible September rate cut as both inflation and the labor market have cooled. While this is only a single weak report, it could give the Fed the ammunition it needs to begin its easing cycle.
Employers added 114,000 new hires to their payrolls in July, according to the Bureau of Labor Statistics. Private-sector firms hired just 97,000 new workers, while government hiring downshifted to 17,000 new employees. Goods-producing industries added 25,000 new workers, an uptick from the prior month’s 11,000. Construction led the sector higher with 25,000 workers added to the payrolls. Manufacturers, meanwhile, added 1,000 jobs in July after shedding 9,000 in the prior month. Service-providing industries employment climbed 72,000, a noticeable slowdown from the 125,000 hired in June. Health care and social assistance services continued to lead the sector, adding 64,000 jobs. The pace of hiring in the leisure and hospitality sector bounced back, up 23,000 compared to the 1,000 added in the prior month. Employment in temporary help services continued to lag, slashing 8,700 jobs. Information services continued to lag, cutting 20,000 workers during the month. Data for May was revised down by 2,000 and the change for June was cut by 27,000. Combined, employment gains were 29,000 lower than previously reported.
The unemployment rate ticked higher to 4.3 percent, the highest level since October 2021. The labor force participation rate ticked up 0.1 percentage points to 62.7 percent as 420,000 workers entered the labor force. The household and payroll surveys remained in alignment in July compared to prior months. According to surveyed households, the number of employed rose by 67,000, while the number of unemployed rose 352,000.
Gains in average hourly earnings slowed compared to the prior month, up 8 cents in July – a 0.2-percent monthly gain. Earnings were up 3.6 percent from a year ago, the slowest pace since May 2021. Average hourly earnings for production and non-supervisory workers increased by 9 cents, for a 0.3-percent monthly gain.
Data junkies, here’s your fix: The July U-6 (the broadest measure of unemployment) jumped to 7.8 percent from 7.4 percent from the prior month, largely driven by an increase in persons working part time for economic reasons.
