Friday, August 6, 2021

Biden Jobs Boom was still in effect in (1st half of) July

Given that mid-July had shutdowns in auto plants in many parts of America, I was worried that we’d see a significant drop in job growth from June’s great numbers. Instead, today’s job report showed that the Biden Boom was as strong as ever in July.
Data from the U.S. Bureau of Labor Statistics released Friday morning showed 943,000 non-farm payroll gains last month, with the unemployment rate falling to 5.4%.

The economy continues to inch closer to pre-pandemic shape. In the depths of the economic shutdown, employment levels dropped by as much as 22.4 million. As of July 2021, the economy appeared to recover almost 17 million of those lost jobs.

The central bank is still intent on maintaining its easy money policies as millions remain sidelined, but the strong July numbers may give some policymakers reason to start paring back its asset purchase program later this year.
The looming end of the easy money was likely why the stock market didn’t jump big-time on such a great report, with the DOW only up 0.4%0 and the NASDAQ falling by 0.4%. But in the real world, things are very good, and the previous 2 months also saw their jobs revised up by a total of 119,000, meaning that nearly 2.5 million jobs have been added since April.

If you go inside the jobs report, you’ll see that there’s good news all around.

On the payrolls side, there was strong evidence that bars, restaurants and hotels were continuing to hire up to meet the added demand that was happening through mid-July – before we knew the Delta variant was going to get this bad.
Total nonfarm payroll employment rose by 943,000 in July, following a similar increase in June (+938,000). Nonfarm payroll employment in July is up by 16.7 million since April 2020 but is down by 5.7 million, or 3.7 percent, from its pre-pandemic level in February 2020.

In July, notable job gains occurred in leisure and hospitality, in local government education, and in professional and business services. (See table B-1. See the box note on page 6 for more information about how the establishment survey and its measures were affected by the coronavirus pandemic.) In July, employment in leisure and hospitality increased by 380,000. Two-thirds of the job gain was in food services and drinking places (+253,000). Employment also continued to increase in accommodation (+74,000) and in arts, entertainment, and recreation (+53,000). Despite recent growth, employment in leisure and hospitality is down by 1.7 million, or 10.3 percent, from its level in February 2020….
It wasn't just those industries that went up, either.

Employers were also paying more last month to get those new employees.
In July, average hourly earnings for all employees on private nonfarm payrolls increased by 11 cents to $30.54, following increases in the prior 3 months. Average hourly earnings for private-sector production and nonsupervisory employees also rose by 11 cents in July to $25.83. The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages. However, because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earnings.
The household survey also had plenty of great news, beyond the decline in the unemployment rate from 5.9% to 5.4%. In particular, long-term unemployment dropped by quite a bit in July.
Among the unemployed, the number of persons on temporary layoff fell by 572,000 to 1.2 million in July. This measure is down considerably from the high of 18.0 million in April 2020 but is 489,000 above the February 2020 level. The number of permanent job losers declined by 257,000 to 2.9 million in July but is 1.6 million higher than in February 2020. (See table A-11.)

The number of long-term unemployed (those jobless for 27 weeks or more) decreased by 560,000 in July to 3.4 million but is 2.3 million higher than in February 2020. These long-term unemployed accounted for 39.3 percent of the total unemployed in July. The number of persons jobless less than 5 weeks increased by 276,000 to 2.3 million.
The only concern I’d have comes from that last number, as the number of people newly laid off went up, going along with a jump in unemployment claims that happened in parts of June and in early July. But that also has good news behind it, as claims have gone back down since then, even with auto plant shutdowns and COVID resurging.

In the 3 weeks since the jobs report was surveyed, we’ve seen daily COVID infections in America go from 22,000 to more than 100,000. But we also haven’t seen many shutdowns or much of an appetite for people to change their going-out behaviors from earlier in the Summer (I’m as guilty as the rest of you, although I haven’t been dining/drinking indoors anyway). So I can’t see August as having the severe slowdowns in hiring that the COVID spike months of November, December and January had.

But I also figure the big COVID numbers will create some kind of jobs headwind soon – too many people are affected for it not to. The question is how big that slowdown eventually is, and whether the momentum of stimulus-fueled spending and a possible infrastructure package overrides it for August and the remaining months of 2021.

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