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Economy

Wages at Or Above 3% for 12th Straight Month, Longterm Unemployed Lowest Since June 2007

Man reading newspaper with the headline Job Market. (Photo: AdobeStock)
Man reading newspaper with the headline Job Market. (Photo: AdobeStock)

The July jobs report beat the consensus forecast for nearly all indicators. The headline focused on the U.S. economy adding 163,000 jobs, beating the expected 151,000.

But the Labor Department’s household survey conducted by the Bureau of Labor Statistics included four big headline stats on wages, unemployment and participation.

Wages

Average hourly earnings (AHEs) for all employees on private nonfarm payrolls rose by 8 cents, or 0.3% to $27.98. That followed another 8-cent increase in June and slightly beat the 0.2% consensus forecast.

AHEs rose by 3.2% over the past 12 months, also slightly beating the 3.1% consensus forecast.

Wage growth has met or exceeded 3% for twelve consecutive months (chart). Since the fourth quarter (Q4) of 2018, American workers’ wages have grown at the fastest pace since the third quarter (Q3) 2008.

Unemployment Rate

Labor Day falls on Monday, September 2 in 2019. The U.S. unemployment rate hasn’t been this low on a Labor Day since 1952. In July, the unemployment rate was unchanged at 3.7%. It has remained at or below 4% for seventeen straight months (chart).

African American unemployment remained at 6.0% for the second straight month, just 0.1% off the all-time low 5.9% hit in May 2018.

The consensus forecast was looking for a 0.1% dip to 3.6%, making the unemployment rate the only indicator to miss in July. But the reason for the flat unemployment rate was actually good news.

Labor Force Participation

The labor force participation rate ticked up 0.1% for the second straight month, and now sits at 63.0% (chart). The increase was driven largely by increased participation among African Americans.

In June, black labor force participation rose significantly from 61.9% to 62.7%. The largest gain came from teenagers and workers in their early 20s.

Long-term Unemployment

The number of long-term unemployed — or, those jobless for 27 weeks or more — fell by 248,000 to 1.2 million. That’s the lowest number since June 2007.

The long-term unemployed accounted for 19.2% of the unemployed, down from 23.7% in June.

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The July jobs report beat the consensus

Economy

Job Creation, Wage Growth and Participation Beat Forecasts in July

Series with themes reflecting a certain billionaire politician who won the 2016 presidential election touting a very strong labor market. (Photo: AdobeStock)
Series with themes reflecting a certain billionaire politician who won the 2016 presidential election touting a very strong labor market. (Photo: AdobeStock)

The U.S. economy added 163,000 jobs in July, wages grew by a faster pace and labor force participation ticked up to 63.0%. The increase in job-seekers kept the unemployment rate at 3.7% (chart).

However, the July jobs report marks the seventeenth straight month unemployment rate was at or below 4%. The number of long-term unemployed — or, those jobless for 27 weeks or more — fell by 248,000
to 1.2 million.

That’s the lowest number since June 2007.

IndicatorPriorRevisedConsensus ForecastForecast RangeActual
Nonfarm Payrolls – M/M ∆224,000 193,000 151,000 140,000  to 170,000 164,000 
Unemployment Rate3.7 %3.6 %3.6 % to 3.7 %3.7 %
Private Payrolls – M/M ∆191,000 179,000 160,000 150,000  to 165,000 148,000 
Manufacturing Payrolls – M/M ∆17,000 12,000 5,000 -5,000  to 10,000 16,000 
Participation Rate – level62.9 %63.0 %
Average Hourly Earnings – M/M ∆0.2 %0.3 %0.2 %0.2 % to 0.3 %0.3 %
Average Hourly Earnings – Y/Y ∆3.1 %3.1 %3.1 % to 3.2 %3.2 %
Avg Workweek – All Employees34.4 hrs34.4 hrs34.4 hrs to 34.5 hrs34.3 hrs

“This is a solid jobs report and although there are some modest downside revisions in the prior 2 months, the strength of the June report gave us a nice cushion to absorb those revisions,” Tim Anderson, analyst at TJM Investments said. “While the average workweek and overtime both declined by 0.1 hours, the labor force participation rate was the strongest internal metric of the report.”

The increase in the labor force participation rate was driven largely by African Americans, which rose significantly from 61.9% to 62.7%. It’s the second consecutive monthly gain for participation.

Manufacturing added 16,000 jobs in July after gaining by 12,000 in June. Employment gains in the manufacturing industry have averaged 22,000 per month in 2018.

Wage growth has exceeded 3% for twelve straight months.

Average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $27.98, after another 8-cent increase in June. Over the past 12 months, average hourly earnings have risen by 3.2%.

“With a 3.2% year-over-year increase, wage growth has now been at or exceeded 3.0% for an entire year,” Acting U.S. Secretary of Labor Patrick Pizzella said in a statement. “America’s workers are taking home more money in their paychecks, which is great news for families and our economy.”

In July, average hourly earnings of private-sector production and nonsupervisory employees rose by 4 cents to $23.46.

The U.S. economy added 163,000 jobs in

Economy

New residential construction, hew homes, housing starts, building permits, depicted on blueprints. (Photo: AdobeStock)
New residential construction, hew homes, housing starts, building permits, depicted on blueprints. (Photo: AdobeStock)

Total construction spending was estimated at a seasonally adjusted annual rate of $1,287.0 billion, down 1.3% (±1.2%). The month of May was revised higher from -0.8% to -0.5%, or $1,303.4 billion.

With the June decline, construction spending is 2.1% (±1.6%) below the June 2018 estimate of $1,314.8 billion. During the first six months of this year, construction spending was $615.8 billion, or 0.5% (±1.2%) below the $619.0 billion over the same period one year prior.

IndicatorPriorRevisedConsensus ForecastForecast RangeActual
Construction Spending – M/M ∆-0.8%-0.5%0.3%-0.5% to 1.0%-1.3%
Construction Spending – Y/Y ∆-2.3%-2.1%

Spending on private construction declined to a seasonally adjusted annual rate of $962.9 billion, down 0.4% (±0.8%) from $967.0 billion.

Residential construction came in at a seasonally adjusted annual rate of $507.2 billion in June, down 0.5% (±1.3%) from $509.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $455.7 billion, down 0.3% (±0.8%) from $457.3 billion.

The estimated seasonally adjusted annual rate of public construction spending was $324.1 billion, down 3.7% (±2.0%) from $336.4 billion. Educational construction was estimated at a seasonally adjusted annual rate of $73.0 billion, down 6.8% (±2.0%) from $78.3 billion.

Highway construction was at a seasonally adjusted annual rate of $101.9 billion, down 6.4% (±5.4%) from $108.9 billion.

Total construction spending was estimated at a

Economy

Manufacturing industry production concept, depicting factory production on a conveyor belt with factory operational workers in uniform. (Photo: AdobeStock)
Manufacturing industry production concept, depicting factory production on a conveyor belt with factory operational workers in uniform. (Photo: AdobeStock)

The Institute for Supply Management (ISM) Manufacturing Index (PMI) came in at 51.2 in July, indicating factory activity growth at a soft pace. The consensus forecast was looking for a reading of 51.9.

PriorConsensus ForecastForecast RangeActual
Manufacturing Index (PMI)51.7 51.9 50.5 (Low) – 54.0 (High)51.2 

“Comments from the panel reflect continued expanding business strength, but at soft levels; June was the third straight month with slowing PMI expansion,” Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

“Demand expansion ended, with the New Orders Index recording zero expansion, the Customers’ Inventories Index remaining at a too-low level, and the Backlog of Orders Index contracting for the second straight month.”

Panel Responses

  • “China tariffs and pending Mexico tariffs are wreaking havoc with supply chains and costs. The situation is crazy, driving a huge amount of work [and] costs, as well as potential supply disruptions.” (Computer & Electronic Products)
  • “Tariffs are causing an increase in cost of goods, meaning U.S. consumers are paying more for products.” (Chemical Products)
  • “Demand for the remainder of 2019 has softened significantly, due to issues in the aerospace industry. The 2020 outlook is looking stronger. Overall, state and local economies remain strong. Recruiting for open positions still requires time to find the right candidates.” (Transportation Equipment)
  • “Global demand remains very strong. [We] shifted shipments to China from our U.S. plants to our Canadian and European plants because of tariffs.” (Food, Beverage & Tobacco Products)
  • “Tariffs continue to be a challenge. We are concerned about the implementation of Mexican tariffs and the cost pressures it will have on our Latin American business.” (Petroleum & Coal Products)
  • “Tariffs continue to adversely impact decisions and forecasting. Our increasing fear is that current trends will weaken the global economy, influencing our ability to grow in 2020 and beyond.” (Fabricated Metal Products)
  • “A late planting season has caused a slowdown in our agricultural business. Seeing higher prices due to tariffs and tariff-related supply chain issues.” (Machinery)
  • “Business is still strong. Pricing on raw materials has stabilized.” (Plastics & Rubber Products)
  • “Business has slowed in the last 30 to 60 days. The last 30 days have tracked 4 percent below plan, but still 6 to 8 percent above the previous year to date.” (Miscellaneous Manufacturing)
  • “Weather in various markets across the country has improved month over month, which has positively affected our daily output. If the trend continues, we will have to replenish [at] an increased month-over-month rate.” (Wood Products)

The Institute for Supply Management (ISM) Manufacturing

Economy

Job Cuts Fall to Lowest Level Since August 2018

Closeup view of a business man cutting a piece of paper with the word jobs written on it, concept for job cut reports. (Photo: AdobeStock)
Closeup view of a business man cutting a piece of paper with the word jobs written on it, concept for job cut reports. (Photo: AdobeStock)

The Challenger Job-Cut Report signaled increased strength in the labor market in July, as U.S.-based employers announced plans to cut 38,845 jobs from their payrolls. That’s down 7.5% from the 41,977 cuts announced in the June report by Challenger, Gray & Christmas, Inc.

IndicatorPrior (May)Result (June)Result (July)
Announced Layoffs58,577 41,97738,845

The decrease in July marks the second consecutive decrease and the lowest level since August of last year, when 38,472 job cuts were announced.

“Employment tends to be a lagging indicator, as companies often keep hiring up to the edge of a recession,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas, Inc. “Right now, the labor market is strong.”

“Employees can continue to anticipate moderate wage growth and advantageous employment prospects for the time being.”

Transportation led all sectors in job cut announcements for July, with 5,532. Industrial Goods Manufacturing announced 4,403 cuts, while the Energy sector announced 3,737. Pharmaceutical companies announced 3,062.

July-2019-Job-CutsDownload

The Challenger Job-Cut Report declined for the

Economy

Mr Assange, sporting a long white beard and wagging a finger, shouted "UK must resist" as he was carried out in handcuffs by seven men and hauled into a police van.
U.S. jobless claims graph on a tablet screen. (Photo: AdobeStock)

The Labor Department reported initial jobless claims rose as expected by 8,000 to a seasonally adjusted 215,000 for the week ending July 27. The 4-week moving average declined by 1,750 to 211,500.

PriorConsensus ForecastForecast RangeResult
Jobless Claims206K214K207K to 215K215K

The advance seasonally adjusted insured unemployment rate was unchanged at a very low 1.2% for the week ending July 20. The advance number for seasonally adjusted insured unemployment for July 20 was 1,699,000.

No state was triggered “on” the Extended Benefits program during the week ending July 13.

The highest insured unemployment rates in the week ending July 13 were in Puerto Rico (2.5), New Jersey (2.4), Connecticut (2.2), Pennsylvania (2.0), Rhode Island (1.9), California (1.8), Alaska (1.7), Illinois (1.6), Massachusetts (1.6), New York (1.4), Oregon (1.4), and West Virginia (1.4).

The largest increases in initial claims for the week ending July 20 were in Michigan (+1,490), Illinois (+737), California (+280), and Nebraska (+16), while the largest decreases were in New York (-13,571), Pennsylvania (-3,506), Texas (-3,186), Georgia (-2,958), and Wisconsin (-2,034).

The Labor Department reported initial jobless claims

Economy

June ADP National Employment Report Revised Higher By 10,000

The ADP National Employment Report finds the U.S. private sector added 156,000 jobs in July, slightly more than the consensus forecast expected. The June total of jobs added was revised up from 102,000 to 112,000.

PriorRevisedConsensus ForecastForecast RangeResult
National Employment Report102,000 112,000 155,000 140,000  to 170,000 156,000 

“While we still see strength in the labor market, it has shown signs of weakening,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “A moderation in growth is expected as the labor market tightens further.”

The goods-producer sector added just 9,000 jobs for the month, including 1,000 in manufacturing and 15,000 in construction. Natural resources and mining lost 9,000 jobs.

“Job growth is healthy, but steadily slowing. Small businesses are suffering the brunt of the slowdown,” Mark Zandi, chief economist of Moody’s Analytics, said. “Hampering job growth are labor shortages, layoffs at bricks-and-mortar retailers, and fallout from weaker global trade.”

The service-providing sector added 146,000 jobs in July, with professional and business services leading the way at 44,000.

The government jobs report — known as the Employment Situation — is due out on Friday. In June, the U.S. economy added 234,000 jobs, a significant improvement from the ADP National Employment Report.

Man reading newspaper with the headline Job Market. (Photo: AdobeStock)
Man reading newspaper with the headline Job Market. (Photo: AdobeStock)

The monthly ADP National Employment Report is derived from total U.S. nonfarm private employment sourced via anonymous payroll data of client companies served by ADP.

The Employment Situation is a household survey derived from total U.S. nonfarm private and public employment.

The ADP National Employment Report for August 2019 will be released at 8:15 a.m. ET on September 5, 2019.

The ADP National Employment Report finds the

Polls

In Seven Most Recent Polls, Sanders Takes Runner-Up in Four, Warren in Three

Senator Bernie Sanders, D/I-Vt., left, and Senator Elizabeth Warren, D-Mass., right, speak at the first Democratic Debate in Miami, Florida on June 26 and 27, 2019.

Senator Bernie Sanders, D/I-Vt., and Senator Elizabeth Warren, D-Mass., are vying for the second place poll position ahead of the second Democratic debate in Detroit, Michigan.

Twenty Democratic candidates will take the stage over two nights. The first night will, for the first time, offer a match-up between Massachusetts Sen. Elizabeth Warren and Vermont Sen. Bernie Sanders, the two top progressives in the Democratic primary.

Lineups for Second Democratic Debates

July 30 Author Marianne Williamson Ohio Rep. Tim Ryan Minnesota Sen. Amy Klobuchar South Bend, Indiana, Mayor Pete Buttigieg Vermont Sen. Bernie Sanders Massachusetts Sen. Elizabeth Warren Former Texas Rep. Beto O'Rourke Former Colorado Gov. John Hickenlooper Former Maryland Rep. John Delaney Montana Gov. Steve Bullock
July 31 Colorado Sen. Michael Bennet New York Sen. Kirsten Gillibrand Former Housing and Urban Development Secretary Julian Castro New Jersey Sen. Cory Booker Former Vice President Joe Biden California Sen. Kamala Harris Businessman Andrew Yang Hawaii Rep. Tulsi Gabbard Washington Gov. Jay Inslee New York City Mayor Bill de Blasio

In the last seven national polls conducted, Senator Sanders has led in four and Senator Warren has led in three.

The second night will be a rematch of former Vice President Joe Biden, D-De., and Senator Kamala Harris, D-Calif., who knocked him down a few pegs in the first round of debates in Miami, Florida.

Mr. Biden maintains his frontrunner status and appears to have rebuilt his lead since a catastrophic debate performance. He has led by margins ranging from 7 points (Economist/YouGov) to 19 points (Quinnipiac) since July 21.

For more than a handful of hopefuls, Tuesday and Wednesday in Detroit represent the last time they’ll be on a stage and have the opportunity to appeal to a national audience.

The Democratic National Committee (DNC) raised the threshold to qualify for the debates scheduled for September and October. To qualify, candidates had to poll at least 1% in three polls from an approved list of pollsters, or boast 65,000 unique donors including 200 donors each from 20 different states.

Rep. Seth Moulton, D-Mass., and Miramar, Florida, Mayor Wayne Messam, two candidates who did not qualify for the first round of debates, failed to qualify.

Far-left billionaire hedge fund manager Tom Steyer and former Rep. Joe Sestak, D-Penn., two candidates who recently announced their presidential bids, also failed to qualify.

Bernie Sanders and Elizabeth Warren continue to

Economy

NAR: Increase in Pending Home Sales Index (PHIS) Fueled By Strong Jobs Market

A photo of a home pending for sale with sale pending on a realty sign. (Photo: AdobeStock)
A photo of a home pending for sale with sale pending on a realty sign. (Photo: AdobeStock)

The National Association of Realtors (NAR) reported the Pending Home Sales Index (PHSI) rose 2.8% in June, a stronger-than-expected gain fueled by a strong labor market.

“Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing,” Lawrence Yun, NAR chief economist, said. “When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases.”

PriorConsensus ForecastForecast RangeResult
Pending Home Sales Index – M/M ∆1.1%0.5%-0.4% to 1.5%2.8%

Mr. Yun predicted the rise for June is likely the start of a positive trend for home sales, a trend that lagged the recent resurgence of economic growth.

“Homes are selling at a breakneck pace, in less than a month, on average, for existing homes and three months for newly constructed homes,” he said. “Furthermore, homeowners’ equity in real estate has doubled over the past six years to now nearly $16 trillion.

However, even though buyers are enthusiastic about the housing market and wealth gains, homebuilders need to increase inventory. Builder confidence has remained solid in the low to mid 60s most of the year, but new residential construction has been more sporadic.

Mr. Yun added the “number of potential buyers exceeds the number of homes available. We need to see sizable growth in inventory, particularly of entry-level homes, to assure wider access to homeownership.”

Pending Home Sales By Region

Pending home sales increased in all four regions from May and from one year ago.

In the Northeast, the PHSI rose 2.7% to 94.5 in June and is now 0.9% higher than a year ago. In the Midwest, the index increased 3.3% to 103.6 in June, and is 1.7% higher than June 2018. 

Pending home sales in the South rose 1.3% to 125.7, and is 1.4% higher than last June. The index in the West shot 5.4% higher in June to 96.8 and is now 2.5% higher than one year ago.

The National Association of Realtors (NAR) Pending

Economy

Consumer Confidence Index Hits 135.7, Up 11.4 Points

Consumer confidence 3D gear graphic reporting the Conference Board Consumer Confidence Index.
Consumer confidence 3D gear graphic reporting the Conference Board Consumer Confidence Index.

The Conference Board reported the Consumer Confidence Index soared 11.4 points in July and now stands at 135.7 (1985=100), up from 124.3 in June. That’s far stronger than the consensus forecast and the highest level for the index all year.

PriorRevisedConsensus ForecastForecast RangeResult
Consumer Confidence Index121.5 124.3 125.0 122.0  to 128.0 135.7

“After a sharp decline in June, driven by an escalation in trade and tariff tensions, Consumer Confidence rebounded in July to its highest level this year,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers are once again optimistic about current and prospective business and labor market conditions.”

“In addition, their expectations regarding their financial outlook also improved,” Franco added. “These high levels of confidence should continue to support robust spending in the near-term despite slower growth in GDP.”

Last week, the Bureau of Economic Analysis (BEA) “advance” estimate for second quarter (Q2) 2019 gross domestic product (GDP) came in at an annual rate of 2.1%, seasonally-adjusted (SAAR).

The stronger-than-expected estimate for Q2 — which is anticipated to be the weakest quarter of the year — was fueled by stronger-than-expected consumer spending gaining 4.3%.

Earlier Tuesday, BEA reported personal income rose $83.6 billion (0.4%) in June, beating the consensus forecast. Consumer spending as gauged by personal consumption expenditures (PCE) increased $41.0 billion, or 0.3% for the month after gaining solidly 0.4% in May and 0.6% in April.

Not surprisingly, consumers’ views of present-day conditions improved in July.

The percentage stating business conditions are “good” rose from 37.5% to 40.1%. Those saying business conditions are “bad” also increased, though marginally from 10.6% to 11.2%.

Consumers’ views of the job market were also more optimistic. Those saying jobs are “plentiful” gained from 44.0% to 46.2%, and those claiming jobs are “hard to get” fell from 15.8% to 12.8%.

The short-term outlook was more optimistic in July, as well. The percentage of consumers expecting business conditions will be better six months from now gained from 19.1% to 24.0%, while those expecting business conditions will worsen fell from 12.6% to 8.7%.

The labor market outlook also improved.

The percentage anticipating more jobs in the months ahead rose from 17.5% to 20.5%, while those anticipating fewer jobs fell from 13.9% to 11.5%. The percentage of consumers expecting an improvement in short-term income prospects rose from 20.5% to 24.7%, while those expecting a decline fell from 7.5% to 6.3%.

About Consumer Confidence Index

The monthly Consumer Confidence Survey is based on a probability-design random sample and is conducted for The Conference Board by Nielsen. The cutoff date for the preliminary results was July 18.

The Conference Board publishes the Consumer Confidence Index at 10 a.m. ET on the last Tuesday of every month.

The Conference Board reported the Consumer Confidence

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