Today’s jobs report is a milestone marking a more-than-full recovery in private-sector employment. And yet job gains remain far higher than before the pandemic and broadly distributed across the economy, even in the most interest rate-sensitive industries and those expected to post losses due to recent weakness in the stock market.
The information sector, for example, which has announced many high-profile layoffs and hiring freezes in recent weeks nevertheless added 25k jobs. Manufacturing and construction, two capital-intensive industries, also contributed solid gains.
There was a clear disconnect between the household survey and the establishment survey in the report, which is a big of a conundrum. While the establishment survey posted large, broad gains, the household survey reported a decline in overall employment levels and labor force participation. The household survey is far more volatile than the establishment survey and generally less reliable, so we think it is most likely that the negative household data is a one-month blip and a statistical anomaly.
Here are some key takeaways from the report:
- The private sector has now fully recovered.
- Overall nonfarm employment is down 524k, or 0.3 percent, from its pre-pandemic February 2020 level. But private-sector employment has now fully recovered and is 140k higher than in February 2020, while government employment is 664k lower.
- The economy is adding high-quality jobs.
- There are two promising signs in the report that indicate the quality of jobs is increasing. Employment in professional and business services continued to grow, with an increase of 74k in June. Within the sector, there have been substantial gains in higher-paying industries, such as in management of companies and enterprises (+12,000), computer systems design and related services (+10,000), and scientific research and development services (+6,000).
- The number of people employed part time for economic reasons declined by 707k to 3.6 million in June and is below its February 2020 level of 4.4 million. This indicates that workers are finding the hours they want and managing to switch from part-time jobs to more stable, better paying full-time jobs in high numbers.
- Employment gains were surprisingly broad-based, with gains even in those industries that tend to be most sensitive to interest rate hikes.
- Gains were surprisingly large in manufacturing (where employment had appeared to be falling in recent manufacturing surveys), construction (which appeared likely to shed jobs due to a cooling housing market), and transportation and warehousing (which some observers expected would be due for losses as consumers shift back to in-person shopping).
- They were also surprisingly large in the information sector, which has been grabbing headlines lately due to high-profile layoffs and hiring freezes.
- Recent losses in brick-and-mortar retail reversed with that sector finally adding jobs again.