Strong Jobs Report for July

By at 2 August, 2019, 4:32 pm

by Raymond J. Keating-

If you look at the media headlines, or even what’s emphasized by assorted economists, the July jobs report from the U.S. Bureau of Labor Statistics would be a middling affair. That is, the establishment survey pointed to a payrolls gain of 164,000. For good measure, the unemployment rate remained unchanged at 3.7 percent.

The problem with looking at these two numbers month after month is that they really don’t offer the most value in terms of getting a read on employment in our economy. The establishment survey payroll data certainly provide information on jobs, but the real action is in the household survey, which, while more volatile from month to month, better captures startup and small business activity.

And as for the unemployment rate, it is detached from the actual number of people in the labor force and employed as a share of the population. So, one could have a low unemployment rate with under-performing levels of labor force participation and employment (as has been the case in recent times). In addition, there could be a higher unemployment rate but with higher labor force participation and employment as a share of the population. So, it’s not a stretch to say that the unemployment is a pretty useless indicator.

Positive Numbers

So, what did the July report tell us about the data points that matter? Well, the numbers were positive.

First, the labor force grew by 370,000 in July, and was up by 705,000 over the past two months. The labor force participation rate increased from 62.8 percent in May to 63.0 percent in July.

Second, employment increased by 283,000 in July, and was up by 530,000 over the past two months. The employment-population ratio moved up from 60.6 percent in May and June to 60.7 percent in July.

Third, those not in the labor force declined by 183,000 in July, and dropped by 341,000 over the past two months.

After some troubling declines in the labor force and employment during the first four months of 2019, the last three months of data have turned positive, and particularly robust over the last two months.

There’s still much room for improvement. Keep in mind that before the last recession, the labor force participation rate came in around 66 percent – compared to the latest being 63 percent – and the employment-population ratio topped 63 percent – compared to 60.7 percent in July 2019.

Aspects of the current labor market certainly are tight, and getting people to move back into the labor force stands as part of the answer.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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