08.07.07
Economic Activity and Labor
The Employment Situation
Nonfarm payrolls grew by 92,000 jobs in July—slower than expected and below the average monthly increase reported during the first six months of 2007 (144,000). A nominal loss in the goods-producing sector trimmed 12,000 jobs from the total, while the service-providing sector added 104,000 to it. Changes were more muted in both sectors this past month than the monthly average in 2007; on average the goods-producing sector has dropped 13,300 jobs each month this year, and the service-providing sector has added an average 149,700. Although employment growth has been moderating, the labor market remains firm: The monthly unemployment rate (4.6 percent) is similar to its average during the first half of 2007, and except for government, which experienced large employment declines, most sectors’ employment grew in July at about the same rates as in recent months.
A drop of 28,000 in government payrolls accounted for some of the weakness in the report; it was the first loss for the sector since January 2006 (−34,000). More than half of the drop was due to a decline in local government education. Employment in temporary help services is often used as an indicator of business confidence and overall demand conditions for labor, as businesses can adjust to new conditions by changing their orders for temporary workers. While the decline in temporary help services may be an indication of softening employment, the magnitude of the change is about the same as in recent months. In contrast, other parts of the service-providing sector remained solid and mostly on par with recent months: Education and health services added 39,000 jobs, financial activities added 27,000, and professional and business services added 26,000. Financial activity, boosted by credit intermediation and related activities (+11,000), experienced its strongest payroll increase since September 2006.
The loss of goods-producing jobs was held to 12,000 in July. Construction, which lost 12,000 jobs, contributed most of the losses to this sector. July’s construction payroll reduction also exceeds the industry’s average monthly payroll change since the start of 2007 (−4,000). However, the employment losses in this sector remain relatively small compared to the sharp contraction recently observed in homebuilding activity. Since last August, employment in construction has declined less than 1 percent. During the same period, total housing starts declined 30.4 percent. If these differing trends reflect the lagged adjustment of employment to slowing activity in this sector, overall employment growth in the coming months may decline further. The loss of manufacturing jobs, which numbered only 2,000, was well above the manufacturing industry’s average monthly loss of 13,000 jobs so far in 2007.
Labor Market Conditions
| Average monthly change | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (thousands of employees, NAICS) | |||||||||
| 2004 | 2005 | 2006 | Jan-Jun 2007 | July 2007 | |||||
| Payroll employment | 172 |
212 |
189 |
144 |
92 |
||||
| Goods-producing | 28 |
32 |
9 |
−14 |
−12 |
||||
| Construction | 26 |
35 |
11 |
−4 |
−12 |
||||
| Manufacturing | 0 |
−7 |
−7 |
−13 |
−2 |
||||
| Durable goods | 8 |
2 |
0 |
−12 |
3 |
||||
| Nondurable goods | −9 |
−9 |
−6 |
−1 |
−5 |
||||
| Service-providing | 144 |
180 |
179 |
157 |
104 |
||||
| Retail trade | 16 |
19 |
−3 |
10 |
−1 |
||||
| Financial activitiesa | 8 |
14 |
16 |
4 |
27 |
||||
| PBSb | 38 |
57 |
42 |
18 |
26 |
||||
| Temporary help svcs. | 11 |
18 |
−1 |
−8 |
−7 |
||||
| Education and health svcs. | 33 |
36 |
41 |
49 |
39 |
||||
| Leisure and hospitality | 25 |
23 |
38 |
33 |
22 |
||||
| Government | 14 |
14 |
20 |
24 |
−28 |
||||
| Average for period (percent) | |||||||||
| Civilian unemployment rate | 5.5 |
5.1 |
4.6 |
4.5 |
4.6 |
||||
a.Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
b. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
Source: U.S. Department of Labor, Bureau of Labor Statistics.
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