HFF Analysis of the July 2018 BLS Employment Report

Friday, August 3, 2018

HFF is pleased to report on the latest employment expansion statistics from July 2018. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

The U.S. added a lower than expected 157,000 jobs in July. Figures were revised upward to 248,000 in June and upward to 268,000 in May, which is a net upward revision of 59,000. Payroll creation has averaged around 200,000 since October 2010, marking the 94th month of consecutive growth and making this period of monthly gains over three and a half years longer than the prior longest streak, which was from 1986 to 1990.

Unemployment decreased slightly to 3.9 percent, remaining around one of the lowest levels seen in decades. Unemployment has now been below five percent for 22 consecutive months.

Wage growth remained constant at 2.7 percent.  Excluding the last two months, wage growth last reached this level in January of 2010. It continues to be modest considering the Unemployment Rate; however, the labor force has continued to grow with 105,000 people joining in July 2018. The continued strong employment environment has economists keeping with their forecast of four rate hikes in 2018.

Average Monthly Payroll Creation

The current expansion cycle is similar to the one from 1991 to 2000 and greater than the 2004 to 2007 expansionary period, but only after a significantly delayed recapture of the nation’s previous employment peak.

 

Job Growth Steady in the Year Ending 2018

The U.S. created 2.18 million jobs in 2017. The last six years’ job growth is on par with the expansionary period from 1992 to 1995.

 

 

Job Growth Positive in Almost All Major Job Sectors

In 2017, the U.S. created 2.18 million jobs, but nearly 40 percent of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors.

Professional Business Services, the industry sector most closely aligned with office using employment, experienced expansion of 518,000 jobs, a year-over-year growth rate of 2.5 percent, just below the five-year average growth rate of 2.6 percent. Temporary Staffing accounted for 97,000 (approximately 19 percent) of these positions. Education and Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 427,000 jobs in the year ending July 2018. Construction added 308,000 jobs (up 4.4 percent) in the year ending July 2018.  Comparing this, construction added 206,000 jobs (up 3.1 percent) in the year ending July 2017.

Unemployment Rate

The Unemployment Rate remains low, decreasing slightly to 3.9 percent in July 2018, marking the 22nd consecutive month below five percent. The Underemployment Rate came in at 7.5 percent in July 2018, a 30 basis point increase from the prior month. Fortunately, the Underemployment Rate has continued its descent from a 2009 high of just over 17 percent. The spread between the two rates is at 360 bps and has been compressing gradually, having reached a high of 740 bps in September 2011.

 

 

Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The current year-over-year wage growth registered at about 2.7 percent, which is relatively low considering the four percent Unemployment Rate. The past three recessions were preceded by a period of FOMC tightening, which align also with an average hourly earnings growth in excesses of four percent reflecting strong economic activity overall.

 

 

Sources: HFF Research, Bureau of Labor Statistics, Department of Labor, Bloomberg

Prepared by HFF Research Analysts Laura Bancroft and Morgan Allen and HFF Managing Director of Research Jimmy Hinton

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