NFP: U.S. Adds 157K vs 191K Jobs Expected In July

by Ike Obudulu Posted on August 3rd, 2018

Washington, DC, USA: Payrolls fell short of expectations at 157000 in July compared with the 191,000 median estimate in a survey of economists and the unemployment rate edged down to 3.9 percent, U.S. Bureau of Labor Statistics figures showed Friday.

Employment increased in professional and business services, in manufacturing, and in health care and social assistance.

Despite the weaker than expected job growth, the unemployment rate which edged down to 3.9 percent in July from 4.0 percent in June, matched estimates.

Household Survey Data

In July, the unemployment rate edged down by 0.1 percentage point to 3.9 percent, following an increase in June. The number of unemployed persons declined by 284,000 to 6.3 million in July. Both measures were down over the year, by 0.4 percentage point and 676,000, respectively.

Among the major worker groups, the unemployment rates for adult men (3.4 percent) and Whites (3.4 percent) declined in July. The jobless rates for adult women (3.7 percent), teenagers (13.1 percent), Blacks (6.6 percent), Asians (3.1 percent), and Hispanics (4.5 percent) showed little or no change over the month.

Among the unemployed, the number of reentrants to the labor force decreased by 287,000 in July to 1.8 million, following an increase in June. (Reentrants are persons who previously worked but were not in the labor force prior to beginning their job search.)

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.4 million in July and accounted for 22.7 percent of the unemployed.

The labor force participation rate, at 62.9 percent in July, was unchanged over the month and over the year. The employment-population ratio, at 60.5 percent, was little changed in July but has increased by 0.3 percentage point over the year.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in July, at 4.6 million, but was down by 669,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In July, 1.5 million persons were marginally attached to the labor force, little different from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4
weeks preceding the survey.

Among the marginally attached, there were 512,000 discouraged workers in July, little changed from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.0 million persons marginally attached to the labor force in July had not searched for work for reasons such as school
attendance or family responsibilities.

Establishment Survey Data

Total nonfarm payroll employment increased by 157,000 in July, compared with an average monthly gain of 203,000 over the prior 12 months. In July, job gains occurred in professional and business services, in manufacturing, and in health care and social assistance. (See table B-1.)

Employment in professional and business services increased by 51,000 in July and has risen by 518,000 over the year. Over the month, employment edged up in temporary help services (+28,000) and in computer systems design and related services (+8,000).

Manufacturing added 37,000 jobs in July, with most of the gain in the durable goods component. Employment rose in transportation equipment (+13,000), machinery (+6,000), and electronic instruments (+2,000). Over the past 12 months, manufacturing has added 327,000 jobs.

In July, employment in health care and social assistance rose by 34,000. Health care employment continued to trend up over the month (+17,000) and has increased by 286,000 over the year. Hospitals added 7,000 jobs over the month. Within social assistance, individual and family services added 16,000 jobs in July and 77,000 jobs over the year.

Employment in food services and drinking places continued to trend up over the month (+26,000). Over the year, the industry has added 203,000 jobs.

Construction employment continued to trend up in July (+19,000) and has increased by 308,000 over the year.

In July, employment in retail trade changed little (+7,000). Job gains occurred in general merchandise stores (+14,000), clothing and clothing accessories stores (+10,000), and food and beverage stores (+8,000). These employment gains were offset by a decline of 32,000 in sporting goods, hobby, book, and music stores, reflecting job losses in hobby, toy, and game stores.

Employment showed little or no change over the month in other major industries, including mining, wholesale trade, transportation and warehousing, information, financial activities, and government.

The average workweek for all employees on private nonfarm payrolls decreased by 0.1 hour to 34.5 hours in July, following an increase of 0.1 hour in June. In manufacturing, both the workweek and overtime were unchanged in July, at 40.9 hours and 3.5 hours, respectively. The average workweek for production and nonsupervisory employees on private nonfarm payrolls
remained at 33.8 hours. (See tables B-2 and B-7.)

In July, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $27.05. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 3 cents to $22.65 in July. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for May was revised up from +244,000 to +268,000, and the change for June was revised up from +213,000 to +248,000. With these revisions, employment gains in May and June combined were 59,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 224,000 per month over the last 3 months.

Nonfarm Payroll (NFP) Report

The Nonfarm Payroll (NFP) report is released on  the first Friday of every month at 8:30 AM ET (Eastern Time) by the U.S. Bureau of Labor Statistics. NFP is a highly anticipated economic report which signals the strength of the US economy. It reveals the health of the jobs market, which filters down into inflation

It is closely analysed to predict Gross Domestic Product (GDP) growth and inflation rates and has the power to move global financial markets.

Economic indicators in the NFP report that markets and policy makers care about the most are Non-Farm Employment Change, Average Hourly Earnings and the Unemployment Rate:

Non-Farm Employment Change

Non-Farm Employment Change measures change in the number of employed people during the previous month, excluding the farming industry. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity

Average Hourly Earnings

The wages growth data, Average Hourly Earnings, measures change in the price businesses pay for labor, excluding the farming industry. It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer;

Unemployment Rate

Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month.

Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.

Unemployment is also a major consideration for those steering the country’s monetary policy, especially the Federal Open Market Committee, FOMC.

Other Economy News: Trade Balance

U.S. Trade Deficit Widens Amid Drop In Exports, Increase In Imports. Reflecting a decrease in exports and an increase in imports, the Commerce Department released a report on Friday showing the U.S. trade deficit widened in the month of June.

The report said the trade deficit widened to $46.3 billion in June from a revised $43.2 billion in May. The deficit had been expected to widen to $46.5 billion from the $43.1 billion originally reported for the previous month.

“The outcome was close to what we were expecting based on the advance economic indicators reports and the assumptions made by the BEA in calculating Q2 GDP,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.

The wider trade deficit was partly due to a pullback in the value of exports, which fell by 0.7 percent to $213.8 billion in June after surging up by 1.9 percent to $215.3 billion in May.

Notable decreases in imports of consumer goods, capital goods, and passenger cars were partly offset by a jump in exports of industrial supplies and materials.

The report also said the value of imports climbed by 0.6 percent to $260.2 billion in July after rising by 0.5 percent to $258.5 billion in June.

Imports of drugs and crude oil showed significant increases during the month, more than offsetting a drop in imports of capital goods.

Amid President Donald Trump’s escalating trade dispute with China, the Commerce Department said the U.S. had a $32.5 billion trade deficit with the communist country in June.

Other Economy News: Non-Manufacturing ISM Report On Business

A closely watched index of nonmanufacturing activity fell to 55.7 last month from 59.1 in June, the industry group the Institute for Supply Management said Friday. Any reading above 50 indicates rising activity as determined by factories such as sales and prices.

Economists had expected a reading of 58.5.

The report indicates service industries — from hair cutting to accounting, representing most of the U.S. economy — are still in healthy shape, but that growth in activity has cooled from earlier this summer.

The report also indicated an index of hiring across service industries picked up, rising to 56.1 in July from 53.6 in June.

The majority of the 16 service industries which responded to the survey cited escalating trade tensions as a primary concern for shipping. Concerns over the tit-for-tat tariffs between the U.S. and other global economic readers took a bite out of business activity despite positive sentiment on domestic conditions.

“Tariffs and deliveries are an ongoing concern,” said Anthony Nieves, chair of the Institute of Supply Management. “The majority of respondents remain positive about business conditions and the economy.”

Despite the decline, a report above 50 percent marks the sector’s 102nd month of expansion. A reading above 50 percent indicates growth in the service sector while a reading below 50 percent signals contraction.

The measure tracks growth in the service industries, including construction, education, wholesale trade and transportation.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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