Job Market Stalls, Temp Stays Hot

Key Takeaways

• Contraction and Deep Revisions: Nonfarm payrolls unexpectedly dropped by 23,000 in July, compounded by a combined downward revision of 103,000 jobs for May and June, indicating that mid-summer labor momentum stalled.

• Jobless Rate Paradox: The headline unemployment rate edged down to 4.1%, but this reflected a shrinking labor force participation rate (slipping to 61.4%) rather than genuine economic strength, masking underlying employment softness.

  
  

• Temporary help up for seven consecutive months in a row. 

  
  

JOLTS Report Analysis

• Stuck in a Low-Hire, Low-Fire (Rinse, Repeat): June job openings remained flat at 7.4 million alongside a stable quits rate of 2% and a layoff rate of 1.1%, signaling that the labor market remains frozen in low worker churn and cautious employer behavior.

The July employment report paint’s a picture of a labor market that may have slowed a little more. Payroll growth came in below expectations, and prior months were revised lower, reinforcing the trend toward more modest hiring. Some of this is due to seasonal education adjustments, government continuing not to hire, and hospitality losses due to the end of the World Cup tournament.  At the same time, the unemployment rate remained at a relatively healthy 4.1%, suggesting businesses are not engaging in widespread layoffs, and the participation rate fell again.   

This labor environment is creating an opportunity for staffing firms that can quickly provide temporary or contract talent while clients manage uncertainty. Temporary help is up for the 7th month in a row. 

For a deeper dive….

•            A more encompassing measure of unemployment (U6) that includes discouraged workers and those holding part-time jobs for economic reasons held at 7.9%.

•            Prime age labor force participation rate (ages 25-54) is up .1% to 83.4%.

•            The overall labor force participation decreased by .1% to 61.4%.  This is 1.8% below the level of February 2020.

·       In July, average hourly earnings for all employees on private nonfarm payrolls, at $37.62, were little changed (+2 cents). Over the year, average hourly earnings have increased by 3.2 percent. In July, average hourly earnings of private-sector production and nonsupervisory employees, at $32.40, were little changed (+4 cents).

·       The average work week for all employees on private nonfarm payrolls was unchanged at 34.3 hours in July. In manufacturing, the average workweek was also unchanged at 40.4 hours, and overtime edged down by 0.1 hour to 3.1 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours

•            APD reported that 44,000 jobs were added in July.