Summary: Non-farm payrolls increase by 943K in July; in line with expectations; previous two months’ figures revised up by 119K; jobless rate down, participation rate up; “gives credence to Fed’s view labour market will maintain momentum”; improvements across the board; gains across age, ethnicity, education standards”; jobs-to-population ratio increases to 58.4%; underutilisation rate falls to 9.2%; annual hourly pay growth increases to 4.0%.
The US economy ceased producing jobs in net terms as infection controls began to be implemented in March 2020. The unemployment rate had been around 3.5% but that changed as job losses began to surge through March and April of 2020. The May 2020 non-farm employment report represented a turning point and subsequent months provided substantial employment gains. Changes in recent months have been generally more modest but still well above the long-term monthly average.
According to the US Bureau of Labor Statistics, the US economy created an additional 943,000 jobs in the non-farm sector in July. The increase was essentially in line with the 925,000 which had been generally expected earlier in the week and slightly greater than the 938,000 jobs which had been added in June after revisions. Employment figures for May and June were revised up by a total of 119,000.
The unemployment rate dropped from June’s rate of 5.9% to 5.4%. The total number of unemployed decreased by 782,000 to 8.702 million while the total number of people who are either employed or looking for work increased by 261,000 to 161.347 million. As a result, the participation rate ticked up from June’s rate of 61.6% to 61.7%.
“Overall, the strength of data gives credence to the Fed’s view that the labour market will maintain momentum through the summer, even with the concerns around the Delta variant. There is still a long way to go towards reaching full employment but the data at least offset some of the pessimism that had been building,” said ANZ Head of Australian Economics David Plank.
Longer-term US Treasury yields rose noticeably on the day. By the close of business, the 10-year bond yield had gained 7bps to 1.30% and the 30-year yield had increased by 8bps to 1.95%. The 2-year yield finished unchanged at 0.21%.
NAB currency strategist Rodrigo Catril noted improvements across the board. “Along with the solid employment gain, there were improvements in the other main metrics of the labour market. These included a fall in the unemployment and underemployment rates, a rise the participation rate, and in the employment-to-population ratio.”