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The Employment Situation, July

The economy lost a fewer-than-expected 51,000 jobs in July, marking the seventh consecutive month of payroll decline. Revisions for May and June also lessened those months' losses collectively by 26,000. The unemployment rate increased from 5.5 percent to 5.7 percent in July, reaching its highest point since March 2004. The diffusion index of employment change edged lower, from 42.2 to 41.2, having remained below 50 since November 2007. A reading below the 50 threshold indicates that a greater number of businesses are subtracting from payrolls than adding to them.

The goods-producing sector shed 46,000 jobs in July, compared to June's larger loss of 77,000. This improvement resulted even though the manufacturing industry lost the same number of jobs as last month (35,000), because construction lost fewer (22,000 versus 49,000) this month, and natural resources and mining added more (11,000 versus 7,000). Service-providing industries lost 5,000 jobs from their payrolls, despite the government's positive contribution of 25,000. However, June's initially reported gain of just 7,000 service jobs was revised up to a gain of 26,000, and May's loss of 8,000 was revised to a 4,000 gain.

Labor Market Conditions

Average monthly change
(thousands of employees, NAICS)




Payroll Employment 211 175 91 -66 -51
Goods-producing 32 3 -38 -75 -46
Construction 35 13 -19 -41 -22
Heavy and civil engineering 4 3 -1 -5 -1.3
Residentiala 23 -5 -20 -27 -14.1
Nonresidentialb 8 14 1 -9 -6.7
Manufacturing -7 -14 -22 -39 -35
Durable goods 2 -4 -16 -26 -17
Nondurable goods -8 -10 -6 -13 -18
Service-providing 179 172 130 8 -5
Retail trade 19 5 6 -26 -16.5
Financial activitiesc 14 9 -9 -6 0
PBSd 56 46 26 -30 -24
Temporary help services 17 1 -7 -27 -29
Education and health services 36 39 44 49 39
Leisure and hospitality 23 32 29 7 1
Government 14 16 21 27 25
Local educational services 6 6 5 9 2.2
Civilian unemployment rate 5.1 4.6 4.6 5.2 5.7
a. Includes construction of residential buildings and residential specialty trade contractors.
b. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
c. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector. d. 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: Bureau of Labor Statistics.

Within the goods-producing sector, construction shed 22,000 jobs and manufacturing shed 35,000. Durable and nondurable goods manufacturing again faced similar losses amounting to 17,000 and 18,000 jobs, respectively. Leading the pack for losses in durables was transportation equipment (8,300) and wood products (3,900). Machinery had the most positive influence on durables, adding 6,100 jobs. Within the nondurable goods segment, the greatest losses were felt in food manufacturing (4,200), printing and related support activities (3,300), plastics and rubber products (2,900), and textile mills (2,600).

Education and health services continued to be a large, lone pillar of strength for the service-providing sector. Health services accounted for the bulk of the gain, adding 34,300 jobs last month, while education added 5,300. Leisure and hospitality (+1,000) and financial services (0) held their own, making no significant contribution either way. This virtual standstill in the two sectors marks both a slowdown of job gains in recent months for leisure and hospitality and an improvement over recent job losses in financial services. Service-industry losses were concentrated in professional business services (24,000), retail trade (16,500), and information services (13,000). Motor vehicles and parts dealers suffered the largest losses within retail trade, shedding 10,600 jobs. Temporary help services, considered a leading indicator of overall employment conditions, had yet another tough month in July, dropping 29,000 jobs.

The three-month moving average of private sector employment growth remains in the negative territory it entered back in January, sitting roughly unchanged from the previous report at -90,000. This moving average removes some of the volatility in monthly employment numbers and discounts the government's consistent addition of jobs.

Private Sector Amployment Growth

The three-month moving average of the unemployment rate has been consistently increasing since the first quarter of 2007. It now stands at 5.56 percent relative to 4.46 percent in March 2007. For the past several months, the unemployment rate for teenagers (ages 16-19) was quite volatile and contributed to the rise in the overall unemployment rate. In July, the unemployment rate for this group increased to 20.3 percent from 18.1 percent in June, which might be partly responsible for the increase in the overall unemployment rate in July to 5.7 percent. However, household data suggest that most of the rise in unemployment could be due to a larger labor force. In July, the labor force increased by 213,000, while an additional 72,000 workers became unemployed, resulting in an increase of 285,000 in the unemployment pool.

Unemployment Rate

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