Research
BLS Jobs Report: Another Summer Blockbuster in July?
Daniel Zhao
Chief Economist at Glassdoor | Jul 30, 2019
On Friday, we’ll get the latest update on the U.S. job market from the Bureau of Labor Statistics. After a disappointing report in May followed by a positive one in June, we'll be watching July's jobs report closely for clarity into the state of the labor market.
Here’s what we’re expecting in the July jobs report:
A historically tight labor market should be translating into higher wages for workers. As employers hire and the pool of available workers shrinks, employers are forced to raise wages in order to attract workers off the sidelines or away from their competitors. The recent deceleration in wage growth is a concern especially if it's being driven by declining employer demand. A pullback in business investment in the face of rising trade tensions and slowing global growth risks derailing the U.S.'s longest economic expansion on record.
- 172,000 new jobs added to payrolls;
- Unemployment rate down to 3.6 percent;
- Average hourly wages up 3.1 percent; and
- Labor force participation steady at 62.9 percent.
Fed Watch
The Federal Reserve's rate cut decision will be announced tomorrow, and markets are largely expecting a 25 basis point rate cut. This is in spite of a positive June jobs report and instead reflects broader economic headwinds that the Fed is concerned about. The Fed's move should be seen more as an insurance policy against trade tensions and a slowing global economy than a response to the latest jobs numbers. While a single jobs report is unlikely to sway the Fed's decisions, the overall deceleration in the labor market should be seen as a data point in the case for loosening monetary policy. Looking forward, a series of bad reports following the Fed's July meeting would likely elevate voices calling for deeper cuts in 2019.E-Commerce Driving Demand for Transportation Workers
As the economy expands and consumer spending rises, an increasing percentage of those consumer dollars are being spent online. U.S. Census Bureau data shows that e-commerce sales reached 10 percent of total retail sales in Q1. And, in another sign of how rapidly e-commerce is growing, Amazon announced in July that sales during its Prime Day shopping holiday surpassed those of Black Friday and Cyber Monday combined. A key enabler of the rise of e-commerce has been convenient and efficient shipping: with Amazon expanding its 1-day shipping reach, competitors like Wal-Mart have been forced to play catch-up. Overall, the continuing explosion of online consumer spending is driving up demand for transportation and logistics services. According to Glassdoor's July Job Market Report, job openings in the transportation and logistics industry increased 40.2 percent year-over-year, faster than any other industry. Additionally, the shortage of workers is forcing employers to raise pay for truck drivers (+3.6 percent year-over-year) and warehouse associates (+4.4 percent). However, employment gains for the industry have been much less positive. In the chart below, we show that the first half of 2019 averaged less than 10,000 jobs added in transportation and warehousing. After that rocky start, June's jobs report showed transportation and warehousing employment adding 23,900 jobs, a solid rebound to late-2018-level growth. We'll be watching July's report for evidence of sustained employment growth in the industry as an indicator of robust consumer spending.
Friday’s Figure to Watch: Pay Growth
Pay growth continues to be the figure to watch in the jobs report. While the headline numbers have been volatile in the last few months, the more concerning statistic has been pay growth. After accelerating wage gains in the back half of 2018, pay gains have stagnated and even reversed course in the last few months. The chart below shows that, according to the Bureau of Labor Statistics, average hourly earnings grew at 3.1 percent in May, the fourth straight month of decelerating wage gains. Glassdoor data has shown a similar deceleration in pay growth from late-2018. Our early data suggests that, while July is unlikely to deviate from the overall trend, a slight uptick in wage growth may be in the cards.
A historically tight labor market should be translating into higher wages for workers. As employers hire and the pool of available workers shrinks, employers are forced to raise wages in order to attract workers off the sidelines or away from their competitors. The recent deceleration in wage growth is a concern especially if it's being driven by declining employer demand. A pullback in business investment in the face of rising trade tensions and slowing global growth risks derailing the U.S.'s longest economic expansion on record.
Conclusion
In Friday's July jobs report, we're expecting a reversion to the mean after a weak report in May and a strong report in June. Overall, the labor market is healthy but slowing. This should be reflected in positive job gains—albeit below 2018 levels—and steadiness in the unemployment and labor force participation rates. As the economic expansion enters uncharted territory, we'll be looking beyond the headline job gains and unemployment numbers and focusing on pay growth and industry-level employment for early indicators of a weakening recovery.Daniel Zhao
Daniel Zhao is Chief Economist at Glassdoor. On Glassdoor's Economic Research team, he has conducted research using Glassdoor's unique data on a variety of topics affecting job seekers and employers ranging from the health of the job market to pay transparency to employee engagement & retention. His work has been cited in publications like the New York Times, the Harvard Business Review and more. Prior to joining the Economic Research team, he also worked on improving the user experience for Glassdoor’s consumer jobs product and mobile app. He holds a bachelor's degree in applied mathematics and economics from Harvard College.
Tags:Labor MarketTransparency
