Labor Market Continues to Soften in July

In July, job growth decelerated significantly, and the unemployment rate increased to a nearly three-year high of 4.3%. The July data indicates that the labor market is slowing, which signals monetary policy easing in the months ahead.

Additionally, wage growth slowed for the second month in a row. In July, wages grew at a 3.6% year-over-year (YOY) growth rate, down 1.0 percentage point from a year ago. This marks the lowest YOY wage gain in the past four years.

Total nonfarm payroll employment increased by 114,000 in July, following a downwardly revised increase of 179,000 jobs in June, as reported in the Employment Situation Summary. The estimates for the previous two months were revised down. The monthly change in total nonfarm payroll employment for May was revised down by 2,000, from +218,000 to +216,000, while the change for June was revised down by 27,000 from +206,000 to +179,000. Combined, the revisions were 29,000 lower than the original estimates.

Despite restrictive monetary policy, nearly 7.8 million jobs have been created since March 2022, when the Fed enacted the first interest rate hike of this cycle. In the first seven months of 2024, 1,419,000 jobs were created. Additionally, monthly employment growth averaged 203,000 per month, compared with the 251,000 monthly average gain for 2023.

In July, the unemployment rate rose for the fourth straight month to 4.3%, the highest rate since October 2021. The number of unemployed persons rose by 352,000, while the number of employed persons was barely changed.

Meanwhile, the labor force participation rate, the proportion of the population either looking for a job or already holding a job, rose 1.0 percentage point to 62.7% for July. Moreover, the labor force participation rate for people aged between 25 and 54 ticked up to 84.0%, the highest level since March 2001. While the overall labor force participation rate is still below its pre-pandemic levels at the beginning of 2020, the rate for people aged between 25 and 54 exceeds the pre-pandemic level of 83.1%.

For industry sectors, health care (+55,000), construction (+25,000), and transportation and warehousing (+14,000) have notable job gains in July, while information employment lost 20,000 jobs.

Employment in the overall construction sector increased by 25,000 in July, after 20,000 gains in June. While residential construction gained 9,100 jobs, non-residential construction employment added 16,200 jobs for the month.

Residential construction employment now stands at 3.4 million in July, broken down as 950,000 builders and 2.4 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was 6,067 a month. Over the last 12 months, home builders and remodelers added 67,600 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,387,400 positions.

In July, the unemployment rate for construction workers rose to 4.4% on a seasonally adjusted basis. The unemployment rate for construction workers remained at a relatively lower level, after reaching 15.3% in April 2020, due to the housing demand impact of the COVID-19 pandemic.