August 5, 2022

Payroll employment jumped by 528 thousand in July after having risen by 398 thousand in June after climbing 386 thousand in May.  In the past three months the average increase has been 437 thousand which is both sizable and clearly not indicative of the economy currently being in a recession as some people still seem to believe.

In addition to hiring people, businesses can also alter the hours of existing employees.  The nonfarm workweek was unchanged in July at 34.6 hours.  It has been declining slowly for more than a year.  But keep in mind that prior to the recession it was 34.4 hours so at 34.6 hours currently it is still relatively long..  As the economy rebounded sharply in the second half of 2020 but firms could not find an adequate supply of workers they significantly boosted the length of the workweek which eventually reached a record long length of 35.0 hours in January 2021 and has edged its way lower in the past year or so..

While employment continues to climb, jobs are still not getting filled.  Job openings have fallen slightly in the past couple of months but they declined from a record high level.  Firms continue to be unable to fill open positions.

The changes in  employment and hours worked are reflected in the aggregate hours index which rose 0.4% in July to 113.1 after having risen 0.3% in both May and June.  This index  appears on track to rise at a solid 3.4% race in the third quarter.

The demand side of the economy remains relatively robust while the production side of the economy is struggling to find enough workers to satisfy demand and work around significant delays in getting the materials necessary for production.

Jobs in the leisure and hospitality industries increased  96 thousand in July after having climbed by 74 thousand in June and 69 thousand in May.  Employment in this sector is still 1.2 million below the February 2020 pre-recession level.  the reality is that many pre-pandemic hospitality workers have chosen to seek employment in other industries.

Elsewhere, jobs in the retail sector increased by 22 thousand .  Manufacturing employment rose by 230thousand.  Construction employment rose by 32 thousand.   Health care and social assistance jobs gained 97 thousand.   Info tech jobs rose 13 thousand.  Transportation and warehousing climbed by 21 thousand.  Leisure and hospitality jobs rose 96 thousand.  Professional and business services climbed by 89 thousand.   Financial sector jobs increased 13 thousand.

Given these steady employment gains we expect GDP growth of 1.5% in the second half of the year after having declined in the first two quarters of the year.  We also expect GDP growth of 2.0% in 2023.

Stephen Slifer

NumberNomics

Charleston, S.C.