U.S. Recoups All Jobs Lost During the Pandemic
The U.S. job market remains hot, and unemployment has fallen to historically low levels. The nation added more than twice as many jobs than economists predicted in July. As a result, the employment base and the unemployment rate are now back in line with February 2020 pre-pandemic levels. However, there are signs of weakness in the economy as inflation remains rampant amid rising interest rates.
Roughly 528,000 employees were added to payrolls in July 2022, according to the Bureau of Labor Statistics (BLS). That was much larger than the average monthly gain over the previous four months (+388,000 jobs) and nearly double the roughly 250,000 additional positions forecasted by experts. Upward revisions to May and June combined showed 28,000 more jobs were added in those months than previously reported. Still, job additions in both months remained higher than economists had expected at the time. Meanwhile, the U.S. unemployment rate in July dropped to 3.5%, down 10 basis points from June.
Jobs by Industry
The jobs recovery in July was widespread with service-providing industries adding 459,000 jobs, while the goods-producing industries added 69,000 for the month. Notable job gains occurred in Education and Health Services (+122,000), Leisure and Hospitality Services (+96,000) and Professional and Business Services (+89,000). No major industries recorded job losses from June to July.
• The Education and Health Services industry’s monthly gain of 122,000 jobs was largely in the health care and social assistance sector (+96,600), with much of that gain in health care (+69,600). The social assistance subsector added 27,000 jobs. Meanwhile, the educational services sector added 24,500 jobs in July. Total employment in Education and Health Services remains 103,000 jobs, or 0.4%, lower than in February 2020.
• Roughly 77% of the Leisure and Hospitality industry’s monthly gain of 96,000 jobs consisted of positions in the food services and drinking places (+74,100) subsector. The arts, entertainment and recreation sector added 21,600 jobs for the month, with 12,700 of those in the amusements, gambling and recreation subsector. Despite recent job additions in Leisure and Hospitality Services, employment in this sector is still 1.2 million workers, or 7.1%, lower than the pre-pandemic level from February 2020.
• The Professional and Business Services industry gained 89,000 jobs in July with most of those in the professional and technical services sector (+47,300). The lower-paying administrative and waste services sector added 28,900 jobs, with the temporary help services subsector accounting for 9,800 of those jobs. As of July, Professional and Business Services had 986,000 more jobs than in February 2020.
• The Government sector gained 57,000 jobs in July. Most of that net job gain was in Local Government jobs (+37,000), with local government education up by 27,400 jobs. The State and Federal Government sectors each added 10,000 jobs during the month. Overall, the Government sector is 597,000 jobs, or 2.6%, below the February 2020 level.
• The Trade, Transportation and Utilities industry posted a net gain of 54,000 jobs in July with notable gains in retail trade (+21,600) and transportation and warehousing (+20,900). Wholesale Trade added 10,500 jobs for the month with durable goods accounting for 8,000 positions. Utilities was up just 400 jobs for the month. Overall employment in Trade, Transportation and Utilities is 927,000 jobs above the February 2020 level.
• The Construction industry added 32,000 jobs in July with a gain of 21,500 jobs in the specialty trade contractors sector. The construction of buildings sector added 7,800 jobs during the month. Construction employment is up by 82,000 jobs, or 1.1%, compared to February 2020 levels.
• The Manufacturing industry posted a net gain of 30,000 jobs in July, with durable goods adding 21,000 jobs and nondurable goods adding 9,000 jobs. Among durable goods manufacturing, job gains were mainly in fabricated metal products (+4,200), miscellaneous durable goods manufacturing (+3,700), machinery (+3,400) and computer and electronic products (+3,300). Job gains in nondurable goods manufacturing were mainly in chemicals (+3,700). Employment in Manufacturing overall is now 41,000 jobs, or 0.3%, above the February 2020 level.
• The Other Services sector added 15,000 jobs in July. The largest contribution to that total was from the personal and laundry services subsector, which added 10,900 jobs. Despite recent job gains, the Other Services sector remains 251,000 jobs, or 4.2%, below the February 2020 level.
• The Information industry added 13,000 jobs in July, with the majority of those gains in other information services (+6,800). The data processing, hosting and related services (+4,100) and publishing industries, except Internet (+3,400) had solid contributions as well. The Information industry is 117,000 jobs, or 4%, above February 2020 levels.
• The Financial Activities industry added 13,000 jobs in July, with the securities, commodity contracts, investments, and funds and trusts, plus the insurance carriers and related activities subsectors adding more than 6,000 jobs apiece. The Financial Activities industry overall is 95,000 jobs, or 1.1%, above February 2020 levels.
• The Mining and Logging industry gained roughly 7,000 jobs in July, with most of that net gain in Mining (+7,200). Logging gained just 100 jobs during the month. As of June, the Mining and Logging industry is 51,000 jobs, or 7.4%, below the February 2020 level.
The unemployment rate (U3 or headline unemployment rate) in July fell 10 basis points to 3.5%, matching the February 2020 showing which was the lowest level since 1969. The unemployment rate has not fallen below 3% since 1953.
As of July, the number of unemployed persons edged down to roughly 5.7 million.
The unemployment rate for adult men decreased 10 bps from June to 3.2% in July, while the unemployment rate for adult women declined 20 bps to 3.1%. On the other hand, the unemployment rate for teenagers rose 50 bps from June to 11.5% in July.
Across most major industries, unadjusted unemployment rates declined or were essentially unchanged from June to July. The biggest decrease was in Mining, down 80 bps to 0.8%. Information also saw a notable decrease in unemployment, falling 70 bps to 2.4%. The unemployment rate in Financial Activities was down 50 bps from June to July, landing at 1.6%. The Leisure and Hospitality Services industry posted a 40-bps decline in unemployment, with the July rate landing at 4.8%. On the other hand, the unemployment rate in Government rose, climbing 70 bps month-over-month to 3.8% in July. Other Services (2.5%) posted a 60-bps decline in the unemployment rate, while Transportation and Utilities (3.8%) recorded a 30-bps drop. All other major industries saw little to no change in unemployment rates from June to July.
The highest industry unemployment rates (not seasonally adjusted) in July were in Leisure and Hospitality Services (4.8%), Transportation and Utilities (4.1%) and Wholesale and Retail Trade (4.1%). The lowest unemployment rates were in the Mining (0.8%), Financial Activities (1.6%), Information (2.4%) and Other Services (2.8%) sectors.
The number of unemployed persons that quit or voluntarily left their previous job to begin looking for new employment increased from 832,000 in June to 842,000 in July. The number of unemployed for 27 weeks or longer dropped from 1.33 million in June to 1.07 million in July and accounted for 18.9% of all unemployed persons. The number of those working part-time that would prefer to work full-time increased by 303,000 from June to about 3.9 million in July, while the number of workers who prefer part-time positions increased by 501,000 to around 21.1 million.
The U6 unemployment rate (seasonally adjusted), which includes part-timers for economic reasons and marginally attached workers was unchanged from June to July at 6.7% but was down from 9.2% a year earlier.
Labor Force Participation
The civilian labor force participation rate decreased 10 basis points (bps), moving from 62.2% in June 2022 to 62.1% in July 2022. That recent rate is still below pre-pandemic levels which averaged 63.1% in 2019. The employment-population ratio increased, rising from 59.9% in June to 60% in July.
Workers marginally attached to the labor force increased by about 41,000 from June to nearly 1.55 million in July, while the number of discouraged workers stood at 424000, up 60,000 month-over-month. Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.
Average Hourly Earnings
Average hourly earnings among employees on private nonfarm payrolls rose $0.15 from June to July. That monthly increase took average hourly earnings to $32.27 in July. On an annual basis, average hourly earnings were up $1.60, a 5.2% increase year-over-year. However, wages were outstripped by inflation, as the Consumer Price Index (CPI) rose 9.1% in the year-ending June.
Industry wage growth varied greatly. Leisure and Hospitality Services average hourly wages jumped 8.7% year-over-year in July, as competition for restaurant and other service workers has had a dramatic effect on wage growth. Education and Health Services workers enjoyed a 6% annual increase in hourly wages. Professional and Business Services employees posted a 5.9% year-over-year increase and Utilities workers saw an upturn of 5.8%. Other industries averaged increases of around 3.5% to 5.5%. The smallest annual increase in hourly wages was seen among Other Services employees (3.2%).
The percentage of workers that telework was unchanged from June to July as many companies have already welcomed workers back into the office. July’s teleworking rate of 7.1% was well below the 35.4% rate recorded in May 2020, according to the BLS’s supplemental data measuring the effects of the coronavirus pandemic on the labor market. The metric does not include employees who worked from home prior to the pandemic. The rate of teleworking will likely continue to remain elevated compared to historical norms as employers discover that remote working can act as a hiring and retention inducement that boosts employee morale while productivity remains close to previous levels.