Labor markets: All the signals are green

Everything about the Labor Department’s July employment report is positive. Unemployment is down and employment is up. The message is clear: the economy’s recovery from last year’s lockdowns and quarantines has a powerful forward momentum that should carry on for a while at least, provided, of course, that Covid’s Delta variant does not prompt a renewed round of economic strictures.

The most immediate encouragement comes from news on job creation. According to the Bureau of Labor Statistics (BLS), the economy created 943,000 new jobs in July. Employment in leisure and hospitality concerns led, accounting for some 40% of total job creation, which is unsurprising, since that was the sector that suffered most during last year’s lockdowns.

Government hiring accounted for more than usual, about one-quarter of the jobs created last month. Those who fret over bureaucratic bloat in Washington can take comfort, however, that most of this hiring occurred at the state and local level, as expanding tax revenues and the generous provisions of federal Covid relief funds allowed for rehiring those laid off last year and an expansion in services.

Otherwise, job creation was spread proportionally across the economy. Only one of the major industry categories tracked by the Labor Department showed a decline. That was retail trade and the small employment drop there more likely reflected of the way the statistics are reported than any sign of weakness. Hiring in this area, after all, had proceeded at a prodigious and unsustainable rate through spring.

Other measures in the report carry more fundamental encouragement. People who had previously dropped out of the workforce – either because they were discouraged in their job search or because they preferred to remain on generous unemployment benefits or for another reason – have begun to return to work. What the BLS calls the “participation rate” has risen. This measure of the proportion of the population either working or seeking work presently stands at 61.7%, higher than in a long while.

The same is true of the “employment-population rate,” which tracks those working as a percent of the population. At 58.4%, it also stands above recent measures. In today’s labor-short economy such trends reassure that business and industry will have the human resources available to meet the nation’s production needs.

Even with this rise in job seekers, employment growth was strong enough to bring down the unemployment rate from 5.9% of the workforce in June to 5.4% in July. The absolute number of unemployed Americans fell by 782,000 and is now barely half its year-ago level, a remarkable comeback indeed. Perhaps even more encouraging is how unemployment has fallen across all major demographic categories. Youth unemployment, at 9.6% in July, was down from June’s 9.9% level and about half the 19.1% rate a year ago. Unemployment for adult men fell, as did unemployment for adult women.

Since women’s employment suffered most during the pandemic lockdowns, it is especially encouraging that the women’s rate, presently at 5.0%, is actually 0.4 percentage points lower than the men’s rate. (No disparate impact problem suspected.) As far as racial and ethnic groups are concerned, unemployment rates for all – white, Hispanic, black, and Asian – fell. What is more, the unemployment gaps between the majority white part of the population and others have all narrowed.

This pace of recovery is, of course, unsustainable. But even if it slows, this kind of momentum will begin to approach, if not quite reach, the extremely favorable labor market conditions that prevailed before the pandemic, when unemployment rates averaged below 4%.

To be sure, many questions hang over the economy’s longer-term prospects — inflation, for instance, huge federal deficits, and financial imbalances among them. But for the immediate future, things look good. The only fly in the ointment over this shorter horizon is the spread of Covid’s Delta variant. If it cannot at present justify a return to last year’s quarantines and lockdowns, there is no forecasting the future course of the disease or whether the authorities will panic.

 

This article was written by Milton Ezrati from Forbes and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.