This Is the Job Market We’ve Been Waiting For
America is getting back to work.
That’s the simplest, clearest analysis of the labor market that emerges from nearly every line of the July employment numbers released Friday morning. It is a welcome sign that, as of the middle of last month, the economy is healing rapidly — and that the previous couple of months reflected healthier results than previously estimated.
There are caveats worth mentioning: The surveys on which this data is based were taken before people were worrying very much about the Delta variant of the coronavirus; the share of Americans participating in the workforce hasn’t really budged; and we still haven’t achieved the kind of one-million-plus monthly job gains that seemed plausible back in the spring.
But the overall picture is not a particularly nuanced one. The job market is getting better, and the economy is healing.
The 943,000 jobs added to employers’ payrolls in July is impressive on its own (though with an asterisk involving education employment, about which more below). It’s all the more so when combined with sharply positive revisions to May and June numbers.
Before the July numbers were released, average job growth over the previous three months was 567,000. Between the strong new number (943,000) and revisions, that average is now up to 832,000 jobs. That is a sign that despite all the headaches businesses are reporting in trying to attract workers, employers and workers really are connecting with each other at a pace not seen in recoveries from the previous three recessions.
That is evident in the data on how many people are working and looking for work.
The share of the adult population that was employed rose 0.4 percentage points in July, to 58.4 percent. Other than last year when the country first emerged from pandemic shutdowns, the last time the share of Americans working rose that much in a single month was May 1984.
This was matched by a sharp decline in the unemployment rate. The new jobless rate of 5.4 percent (down from 5.9 percent) is the kind of number that not too long ago would have prompted quite a few economists and central bankers to declare “Mission Accomplished.” (The experience of 2018-2019, with sustained jobless rates around 3.5 percent — combined with the fact that the share of people working now remains well below prepandemic levels — means that you will hear few such declarations of victory.)
A broader measure of unemployment — including people out of work because they gave up looking for a job, and people working part time who want full-time work — fell by even more, to 9.2 percent from 9.8 percent. The number of Americans who were working only part time because of slack business conditions fell by a whopping 465,000.
Look for the new numbers to become central to debates over whether expanded unemployment payments have been a factor in holding back job creation by incentivizing people not to work. Many states suspended those expanded benefits earlier in the summer, which would be reflected in the July data.
The early verdict? Maybe. The steep decline in the number of people unemployed — 782,000 people — is certainly consistent with people returning to work instead of receiving jobless benefits. But the strong and steady growth in payroll employment in May and June is not what you would expect to see if unemployment benefits (or the lack of them) were the primary driver of the labor market.
Either way, we’ll know more when state-level data is released in coming weeks.
Education employment in public and private schools contributed a combined 261,000 jobs, but not because schools went on a strange midsummer hiring binge.
In the normal seasonal pattern, many teachers and other educators fall off their schools’ payrolls at the end of the academic year, which the Labor Department’s seasonal adjustment procedures account for. But with many schools closed or in limited operation this academic year, there were fewer people losing their jobs, meaning the seasonal adjustment most likely caused an overestimate in the gain in jobs.
There are still plenty of problems in the United States economy, and it’s foolish to think that a single month of data, or even a few good months in a row, signals a healing of the scars of the pandemic recession. Among other things, the share of the adult population working remains 1.7 percentage points below its prepandemic level. And the labor force participation rate barely edged up in July.
But there’s little question, when the employment numbers are combined with other recent data, that the trends are heading in the right direction.