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By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

July Payroll Job Growth Shows Improvement for 2nd Straight Month

Payroll job growth improved in July, following up on a similarly better print for June. Private-sector jobs rose by 205,000 in July, following a gain of 194,000 in June, the latter boosted by a slight +1,000 revision. The “core” jobs measure we track, private jobs excluding construction and retailing, rose by 198,000 in July, with a +14,000 revision to June boosting that month’s gains to 177,000.

As you can see in the accompanying chart, both of the last two months’ gains are above the average growth rate for 2011–15. In contrast, over the previous 17 months, we had been below that 2011–15 average 12 times. In other words, the last two months do mark an improvement over what job growth had been for the past year or so.

Another important feature of the report, for our forecast at least, was news of good-sized job gains in the manufacturing sector. Factory jobs rose by 16,000 in July, with 17,000 job gains for factory production workers (line workers). Factory jobs had fizzled over the previous two months, after nice gains in late-2016, and our guess was that softening exports and capital spending growth would drive continued softness in manufacturing activity in late-2017. The July news was at odds with this outlook.

Hourly wages rose by 0.3% in July, both for production workers and for all workers. Even with this better growth, however, the 12-month growth rates in hourly wages for these aggregates, at 2.5% for all workers and 2.4% for production workers, are down noticeably from what we were seeing in 2016.

Where did the better job growth occur? The really noticeable improvement was in leisure and hospitality (restaurants, hotels and resorts), where recent average job gains have been 45,000 per month, compared to 20,000 per month gains earlier this year.

One month does not make a trend, nor even do two months. Still, we have to acknowledge that overall job growth has been better in the last two months than we were expecting, and factory jobs were better in July. Another stronger gain in August would put our forecast line in jeopardy. It would also substantially raise the chances for a Fed rate hike in September.

Private-Sector Job Growth
Private-Sector Job Growth
Source: Bureau of Labor Statistics. As of 31 Jul 17

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

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