Employers successfully added more workers as business activity held firm in July. Here are the five things we learned from U.S. economic data released during the week ending August 6.
Hiring accelerated further in July. Nonfarm payrolls swelled by a seasonally adjusted 943,000 during the month, per the Bureau of Labor Statistics. The BLS also added 119,000 to its previously reported May and June payroll estimates. In all, nonfarm payrolls remained 5.7 million under its pre-pandemic peak even after growing by 16.7 million since April 2020. Private sector employers added 703,000 workers, split between gains of 659,000 in the service sector and 44,000 in the goods-producing side of the economy. Industries adding the most workers in July were leisure/hospitality (+380,000), education/health services (+87,000), professional/business services (+60,000), and transportation/warehousing (+49,700). Another major contributor to the headline figures was a big jump in local government education jobs (although this gain appears to be largely a technical abnormality tied to seasonal factors).
Based on a separate household survey, the unemployment rate fell a half-point to a pandemic low of 5.4 percent, with significant drops for all major demographic groups. 261,000 people entered the labor market as the labor market participation rate inched up by 1/10th of a point to 61.7 percent (February 2020: 63.3 percent). The participation rate for adults 25 to 54 also added 1/10th of a point to 81.1 percent (February 2020: 82.9 percent). Falling to pandemic lows were the count of “involuntary” part-time workers (-144,000 to 4.483 million) and the broadest labor underutilization measure (the U-6 service, dropping by 6/10ths of a point to 9.2 percent).
Purchasing managers report vigorous service sector activity in July. The Institute for Supply Management’s Services PMI added four full points during the month to a record-high reading of 64.1. Services PMI has been higher than 50.0—the threshold between an expanding and contracting services sector—for 14 straight months. Supporting the increase were improvements among indices for business activity/production, new orders, and employment. Meanwhile, the inventories measure declined. Seventeen of 18 service sector industries grew in July, led by arts/entertainment/recreation, wholesale trade, and accommodation/food services. The press release noted that “[m]aterials shortages, inflation, and logistics continue to negatively impact the continuity of supply.”
…while the manufacturing measure pulled back (but remained strong). The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, lost 1.1 points in July to a reading of 50.0. Even after falling to its lowest reading since January, the PMI has remained above the critical 50.0 reading for 14 consecutive months. Indices for new orders, production, and inventories fell from their June marks while the employment measure improved. Seventeen of 18-tracked manufacturing industries expanded in June, led by furniture, printing, and apparel. The press release warned that “labor challenges” and “transportation inefficiencies” were holding back more growth.
Factory orders and shipments rose in June. The Census Bureau reports new orders for manufactured goods grew for the 13th time in 14 months with a 1.5 percent increase to $506.0 billion. Durable goods orders jumped 0.9 percent while those of nondurables surged 2.1 percent. Civilian non-aircraft capital goods orders—a proxy of business investment—rose 0.7 percent. Shipments also increased for the 13th time in 14 months, rising 1.6 percent to $499.0 billion. Durable goods shipments gained 0.4 percent, while nondurables shipments jumped 2.1 percent. Unfilled orders expanded 1.0 percent to $1.233 trillion (its fifth consecutive increase) and inventories enlarged by 1.0 percent to $740.7 trillion.
The trade deficit widened in June. Exports grew 0.6 percent to $207.7 billion, and imports swelled 2.1 percent to $283.4 billion. The resulting trade deficit of -$75.7 billion was up 6.7 percent for the month and a record for the Census Bureau and the Bureau of Economic Analysis data series. The goods deficit expanded by $4.0 billion to -$93.2 billion while the services surplus contracted by $0.7 billion to +$17.4 billion. The former reflected a sharp increase in imports of industrial supplies/materials. The U.S. had its largest goods deficits with China, the European Union, and Mexico.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending July 31, 2021, First-Time Claims, seasonally adjusted): 385,000, -14,000 vs. the previous week, -658,000 vs. the same week a year earlier). 4-week moving average: 394,000 (-69.6% vs. the same week a year earlier).
- Vehicle Sales (July 2021, Light Trucks and Vehicles Sales, seasonally adjusted annualized rate): 14.75 million units (vs. June 2021: 15.39 million; July 2020: 15.25 million).
- Construction Spending (June 2021, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.552 trillion (+0.1% vs. May 2021, +8.2% vs. June 2020).
- Consumer Credit (June 2021, Outstanding Non-Real Estate Back Consumer Credit Balances, seasonally adjusted): $4.319 trillion (+$37.7 billion vs. May 2021, +4.2% vs. June 2020).
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What We Learned About the U.S. Economy Last Week 