July’s Jobs Report (Literally) Couldn’t Have Been Any Better

Add another ‘W’ to the job market’s win/loss record. July was another solid month for the nation’s employment picture.

That’s not all that easy to tell with just a superficial glance at the data. The 157,000 new payrolls created last month fell short of expectations, and was well off June’s total. It was enough to whittle the unemployment rate down to 3.9%. But, the unemployment rate has been stagnant for a few months now, and was at 3.8% in May.

As has been the case for a long while now though, there’s more to the story. The raw numbers are deceptive in and of themselves, as they don’t measure the fact that the quality of jobs – and paychecks – are improving, and they don’t account for the fact most everyone had a job ‘before.’ It just wasn’t a job they wanted for one second longer than they had to keep it. People continue to move on to bigger and better opportunities.

Nowhere is this more evident than on the graphic that looks at hourly pay. The image below is just that, though bear in mind its data only plots numbers through June. Even as of June hourly pay rates were edging higher, but the Department of Labor confirmed on Friday that hourly pay grew 2.7% in July on a year-over-year basis. That should put paychecks right at record-high levels achieved in mid-2017.

The underlying raw data confirms the premise. The number of people with jobs reached 155.97 million people last month, moving to record-high levels. Conversely, the number of people without jobs (officially unemployed) started to fall again, reaching 6.28 million. That’s the second-lowest reading since the early 2000’s, and extends a long-standing downtrend. The number of people without jobs that are no longer receiving benefits but still want a job fell too, to 5.16 million, likely renewing a downtrend that’s been in place since 2013. Multi-year lows are in sight there too.

And for the record, population hasn’t obscured the picture, making things look better than they actually are. The 60.5% of the U.S. population that now has a job is a multi-year high as well… and still trending higher.

The oddball here is the labor force participation rate. It’s stuck at just under 63.0%. This portends to trouble, but much of the stagnation there can be attributed to the ongoing en masse retirement of baby-boomers who simply don’t want or need to work. It doesn’t perfectly jibe with the employment/population ratio uptrend, but it’s a factor. It’s not a liability, however, primarily because wages are rising AND the number of people with jobs is growing AND the number of people reporting joblessness is falling.

In school-grade terms, July’s job report has to get an ‘A’… and that’s in a classroom where an ‘A’ isn’t handed out flippantly. There’s very little that structurally could improve the numbers being reported by the DOL. The only thing that would help is population growth, as the number of reported job openings – as of June anyway – was at a record-breaking 6.64 million.

Given that 2/3 of the U.S. economy is consumer-oriented, these increasingly empowered spenders points to continued economic growth. Correspondingly, it points to more corporate earnings growth. That may not stave off short-term corrections, but it will certainly help keep the bull market alive.