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The Fed is looking for jobs reports to justify reducing its asset purchases, and it was. But the labor market is still disrupted.
By Wolf Richter for WOLF STREET.
As companies desperately seek workers and offer hiring bonuses and higher wages, amid record vacancies, 6.1 million fewer people were working in July than ‘before the pandemic, and 13 million people were still claiming state or federal unemployment benefits. But this strange phenomenon is showing signs of easing.
Employers of all types – businesses, governments and nonprofits – said they added 943,000 workers to their payroll in July and 2.5 million in the past three months, bringing their payroll to 146.8 million workers , according to the Bureau of Labor Statistics today. But the total payroll was still down by 5.7 million compared to February 2020 (green line).
Households reported that the number of people working, including the self-employed, jumped by 1.04 million in July and increased by 1.5 million in the past three months, to 152.6 million workers. But it was still down 6.1 million from February 2020 (red line).
The fact that households reported a gain of 1.5 million workers in the past three months, while establishments reported a gain of 2.5 million workers may indicate that some self-employed workers, who are counted in the Household surveys, but not establishment surveys, have shifted to regular employment with companies – which would make sense, and has been seen anecdotally, given the aggressiveness with which companies are hiring now.
If the Fed is looking for jobs reports that will give it economic cover to start cutting back on asset purchases later this year – as many Fed governors have said recently – it was. .
People are only slowly re-entering the labor market.
The economically active population – people who were employed during the survey period or who were actively looking for work in the previous four weeks – increased by 261,000 people in July and 359,000 people in the last three months, to 161.3 million. It remains down by 3.2 million people compared to December 2019. The working population has recovered just over half of its drop in April 2020:
People who might want to work in the future but were not actively looking for a job in the weeks preceding the survey – whether they are engaged in other projects, or have to care for their children or an elderly relative, or otherwise – are not considered part of the labor force.
People who “retired” during the pandemic as part of the sudden retirement boom – including those seeking quality of life with their stock market or crypto earnings – may not be permanently retired and may return to retirement. the job market when things change for them, such as a sharp drop in the stock market or cryptos, a phenomenon that occurred after the dotcom collapse when many former stock market millionaires started looking for jobs again . Once they are actively looking for a job, or have obtained a job, they re-enter the labor market.
Employment in the manufacturing sector increased by 27,000 workers in July and 102,000 in the past three months, to 12.4 million jobs, amid a boom in manufacturing and endless complaints about difficulties in hiring qualified people. The manufacturing payroll is still down by 433,000 people, or 3.4%, compared to February 2020:
But with automation, manufacturing production, despite 3.4% fewer jobs, recovered from February 2020. This is the trend with every slowdown: manufacturers are cutting costs and increasing productivity by investing in automation.
Although manufacturing employment declined for several decades, production continued to increase until the Great Recession, when manufacturers massively outsourced production. Much of the manufacturing of auto components moved to China at the time, and production, adjusted for inflation, never recovered to its 2007 peak:
Employment in the leisure and hospitality sector jumped 380,000 jobs in July and 1.09 million in the past three months, as restaurants, bars, hotels and casinos furiously try to hire workers. Employment was still down 1.74 million people from the February 2020 peak, but a massive increase from the April lockdown troughs of last year:
Employment in construction increased by 11,000 workers in July, after two months of decline, for a net drop over these three months from 18,000 workers, to 7.4 million workers:
Employment in federal, state and local governments increased by 240,000 workers in July and 468,000 workers in the past three months, after massive job losses during the pandemic.
At the federal level, military personnel and the right people from major intelligence agencies are not included. But USPS employees are included. At state and local levels, it includes education workers, many of whom are now returning to work. The number of government employees plunged during the pandemic, in part linked to jobs in education. In July, the government’s payroll was still down by 782,000 workers compared to February 2020:
In mid-June, some states began withdrawing federal unemployment benefits, which include the additional $ 300 per week. Two large states, Texas and Florida, withdrew at the end of June. Other states followed in July. Currently, more than half of the states have withdrawn from federal unemployment benefits.
In these states, unemployed residents, if eligible, still receive meager state unemployment benefits, but no longer receive additional federal benefits. Federal benefits are scheduled to expire for all states on September 6. Every employer looks forward to this day.
Part of the “labor shortage” was that many people had to look after children when schools were closed or had to look after elderly parents and could not work.
In addition, employers had to compete with this combination of federal and state unemployment benefits which ended up paying large numbers of low-wage people more than they earned while working, and provided other benefits. .
This has effectively put a floor below the pay scale in some industries, and employers have had to adjust to it by increasing wages, improving benefits, offering bonuses, etc. – or settle for fewer employees, or both.
This strange phenomenon of “labor shortage” in an economy with no shortage of people who could and could possibly work under different conditions is now gradually diminishing. And in states that have withdrawn from unemployment benefits, ongoing UI claims have declined significantly since early July, compared to states that have maintained federal benefits. Read… Yes, more people have returned to work in states that ended $ 300 / week in federal unemployment benefits
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