July 2015 Employment Situation

Employment’s growth trend is slowing from it fastest levels in the current expansion.  America added 215,000 jobs in July 2015 according to the Bureau of Labor Statistics.  While the headline figure is healthy, it is below the 12-month moving average of 243,000 new jobs.  In February, this moving average was 269,000 jobs a month, so some momentum has been lost.  Holding steady versus a month earlier, the unemployment rate stands at 5.3 percent.

Other statistics within the report improved.  On average, employees worked 34.6 hours a week in July, an improvement of six minutes per person versus June.  Hourly wages also ticked up in the period, up five cents or 0.2 percent to $24.99; this measure of income has increased 2.1 percent in the past year.

As the Federal Reserve considers normalizing the overnight interest rate, the bankers are paying particular attention to the underemployment rate which is a statistic that includes everybody working fewer hours than they prefer.  This rate fell to 10.4 percent, down from 10.5 percent in June.  But our central bank is also keeping a watchful eye on the labor force participation rate; currently sitting at 62.6 percent, this measure reached its lowest level since 1977 in June but was unchanged in July.

America’s labor market is healing but still has some nasty scars left over from the great recession.  By historical standards, the unemployment rate looks healthy, but it is being artificially boosted by the generationally low labor force participation rate.  Year-over-year wage gains were in line with the increases experienced over most of the current expansion, so the rate of change is not warning of incipient inflation.  If the Federal Reserve raises the overnight bank lending rate in the next few months ahead, an overheated labor market is unlikely to be primary justification.              (by C. Cox)