U.S. Job Growth Weakens While Unemployment Rises

The U.S. labor market was weaker than expected in July. Hiring among U.S. employers continued to decelerate, and the unemployment rate rose to its highest level in nearly three years as more people entered the labor force. 

Employers added roughly 114,000 workers to payrolls in July 2024, according to a survey of businesses by the Bureau of Labor Statistics. Those additions came in below the 179,000 jobs gained in June (which was revised down) and were well short of what economists were forecasting (175,000 to 185,000 jobs). The U.S. economy has now added jobs for 43 consecutive months, the fifth-longest period of job base expansion on record dating back to 1939.

Of note: The job counts for May and June were revised down. Downward revisions to May 2024 data showed 2,000 fewer jobs were added than previously reported, down to 216,000 positions. The June 2024 job growth number was revised down by 27,000 jobs to a total of 179,000 positions. With these revisions, employment gains in May and June combined were 29,000 jobs lower than previously reported.

Job gains in July were considerably lower than the monthly average of around 215,000 jobs added over the previous 12 months and came in below pre-pandemic norms. From 2015 to 2019, the U.S. economy added an average of roughly 190,000 jobs each month.

On an annual basis, the nation gained roughly 2.51 million jobs as of July 2024. That was the weakest annual gain in over three years but still registered above the pre-pandemic average of around 2.4 million jobs added annually from 2015 to 2019.

The U.S. economy has recovered all the net jobs lost during the COVID-19 pandemic. As of July, the nation had 6.4 million more jobs (+4.2%) compared to the pre-pandemic employment level from February 2020.

Jobs by Industry

 More than half of the 11 major industry sectors gained jobs in July. The most notable job base expansion was in Education and Health Services (+57,000 jobs). Smaller gains were recorded in Construction (+25,000 jobs), Leisure and Hospitality Services (+23,000 jobs), Trade, Transportation and Utilities (+22,000 jobs) and Government (+17,000 jobs), while Manufacturing eked out a modest gain (1,000 jobs). Notable job loss was recorded in Information (-20,000 jobs). Other industries losing jobs during July included Other Services (-5,000 jobs), Financial Activities (-4,000 jobs), Mining and Logging (-1,000 jobs) and Professional and Business Services (-1,000 jobs).

Most major industries have recovered all the jobs lost during the COVID-19 pandemic downturn. Education and Health Services has seen the best recovery, with the July 2024 job count coming in roughly 1.81 million positions ahead of February 2020 numbers, followed by Professional and Business Services (+1.56 million jobs). Also well ahead of pre-pandemic norms was Trade, Transportation and Utilities (+1.35 million jobs).

The Leisure and Hospitality Services sector, which was the hardest-hit sector during the pandemic, has recouped all the jobs lost during that downturn. As of July, that sector had 27,000 more jobs than in February 2020, but that was just a 0.2% increase in the job base.

The Mining and Logging and Other Services sectors have yet to recover all the jobs lost during the COVID-19 downturn. The Mining and Logging industry was 51,000 jobs below its February 2020 level, while Other Services was 27,000 jobs in the hole. That put the July 2024 employment count in Other Services 0.5% below the pre-pandemic level, while the job base in Mining and Logging was 7.5% below the February 2020 count.

Unemployment

The unemployment rate (the U3 or headline unemployment rate, which is seasonally adjusted, is a survey of households) rose 20 basis points (bps) from June to July, registering at 4.3%, the highest level since October 2021, and above economists’ expectations of 4.1%. The rise in the unemployment rate came amid the labor force participation rate that increased from 62.6% in June to 62.7% in July, as 420,000 more people entered the labor force. 

The unemployment rate registered below 4% from February 2022 to April 2024, averaging 3.6% during that period. At the onset of the pandemic, the unemployment rate climbed to 14.8% in April 2020. Prior to the pandemic, the unemployment rate clocked in at 3.5% to 5.7% from 2015 to 2019, averaging 4.4% during that five-year period. Prior to 2023, the unemployment rate hadn’t registered below 3.5% since 1969.

The total number of unemployed persons in the U.S. registered at roughly 7.16 million in July, up from about 6.81 million in June.

The unemployment rate for adult men (20 years and over) rose 20 bps from June to July, to 4%. The unemployment rate for adult women (20 years and older) rose 10 bps to 3.8%. Meanwhile, the unemployment rate for teenagers (16 to 19-year-olds) jumped 30 bps from 12.1% in June to 12.4% in July.

Average Hourly Earnings

Average hourly earnings among employees on private nonfarm payrolls rose $0.08 (+0.2%) from June to July. That monthly increase took average hourly earnings to $35.07 in July. On an annual basis, average hourly earnings were up $1.23, a 3.6% increase year-over-year. Still, that yearly increase was the lowest since May 2021. Overall wage growth continues to surpass rising prices, as the Consumer Price Index rose 3% annually in June. The Fed’s target for inflation is currently at 2%.

Wage growth over the past year was strong across most major industries. The largest increases in earnings from July 2023 to July 2024 were recorded among workers in Financial Activities (4.7%), Manufacturing (4.4%), Construction (4.3%), Leisure and Hospitality Services (3.9%), Mining and Logging (3.9%), Professional and Business Services (3.9%) and Other Services (3.8%). Smaller increases were among employees in Trade, Transportation and Utilities (3%), Education and Health Services (3.1%) and Information (3.4%).