EmailNonfarm payroll gains in July topped 100,000 -- the level necessary to support a steady unemployment rate -- for the first time since April. Nonfarm payrolls added 117,000 jobs in July after adding an upwardly revised 46,000 jobs (from 18,000) in June. The Briefing.com consensus expected payrolls to increase by 84,000 jobs.
Private sector job growth was even stronger, adding 154,000 new jobs in July after gaining an upwardly revised 80,000 (from 57,000) in June. The consensus expected private payrolls to add only 100,000 new jobs.
The unemployment rate dropped in July to 9.1% from 9.2% in June. The consensus expected the unemployment rate to remain at 9.2%.
The improvement in the employment situation is a nice break from all of the poor economic news of late. It does not, however, signal a substantial change in the labor market recovery. The job gains were barely enough to cover labor force growth under normal economic conditions and the U.S. is not in a normal environment. Since the recession, millions of discouraged workers left the labor sector as job openings became scarce. As the labor sector improves, these workers will eventually reenter the work force and cause labor force growth to exceed the normal 100,000 level. Employment gains will likely have to exceed 200,000 per month in the future to accommodate the normal and discouraged worker labor force growth.
As it so happens, the decline in the unemployment rate in July was mostly due to the labor force falling by 193,000. If the labor force had remained at June levels, the unemployment rate would have remained at 9.2%. If the labor force had increased by 100,000, the unemployment rate would have increased to 9.3%. The unemployment rate would have been even higher if a number of discouraged workers reentered the labor force.
