Employment Situation, July 2017

This morning the Bureau of Labor Statistics released the latest monthly installment of its Employment Situation report, a long-standing series that monitors the state of the labor market in the US.

The report, a compilation of data from a large number of employers around the country,  estimates that a total of +209,000 new jobs were created last month (I’ve corrected a typo from an earlier version of this post).  Revisions to the prior two months’ data added another +2,000 new positions to that.

The unemployment rate came in at an ultra-low 4.3% of the workforce.  This figure is in line with recent experience, but one which would traditionally be regarded as indicating full employment plus a lot (the idea being that there’s a certain level (4.5%?) of frictional unemployment, basically people quitting one job to take another but not having yet started).

 

In the past, reaching full employment has also made itself known by accelerating wage gains, as employers bid up the price of the additional workers they need and raise wages all around for existing employees to ward off job poaching from rivals.

In perhaps the most perplexing aspect of this recovery, however, there’s still no sign of wage acceleration.  Wages are rising by a tad more than inflation but the rate of growth has remained steady at about 2.5%/year for a long time.

Although the +220,000 figure is 20% higher than the consensus guess of Wall Street economists, the stock market is regarding the ES with a shrug of the shoulders.  Only a sharp uptick in wage growth will make an impact (probably negative, at least at first) on stocks and bonds from this point on.