Event: The July Employment Situation, released today by the US Bureau of Labor Statistics (BLS), indicates that total nonfarm employment rose by +187,000 in July on a seasonally adjusted basis, while temporary help services employment fell by -22,100 jobs. The temporary agency penetration rate was 1.90% in July, down slightly from a revised 1.92% in June. The national unemployment rate fell to 3.5% in July from 3.6% in June, and the labor force participation rate remained at 62.6%.

Employment expanded in most industry groups. The group with the largest gain was again Health and social assistance, which added +87,100 jobs; followed by Other services, which added +20,000 jobs; and Financial activities, which added +19,000 jobs. Employment declined in three sectors and the temporary help services industry. The greatest decline was in temporary help services, which fell by -22,100; followed by Information, which fell by -12,000; and Transportation and warehousing, which fell by -8,400.

BLS Revisions:

The change in total nonfarm payroll employment for May was revised down by 25,000, from +306,000 to +281,000, and the change for June was revised down by 24,000, from +209,000 to +185,000. With these revisions, employment in May and June combined is 49,000 lower than previously reported.

The change in temporary help services employment in May was revised down from a gain of +3,000 to a loss of -6,800, and the previously estimated decline of -12,600 in June was revised down to a loss of -20,200. With these revisions, temporary help services employment in June was -17,400 lower than previously reported.

SIA’s Perspective: 

The US economy added +187,000 jobs in July, below the median forecast in the Reuters and Bloomberg surveys of economists, both of which called for a gain of +200,000. This mild slowing in job gains is consistent with the Federal Reserve’s “soft landing” scenario - reducing the inflation rate back to the 2% target without causing a recession.

At 3.5%, the unemployment rate remains historically low and as seen in June, the unemployment rate fell even as the labor force grew, with an additional 152,000 people entering the labor force in July. The overall labor force participation rate remains at 62.6%. The prime age labor force participation rate declined slightly, falling from 83.5% in June to 83.4% in July. The decline in prime age participation was offset by increased participation among those ages 55 and above, suggesting some of the folks who retired early during COVID are returning to the workforce. Labor scarcity remains a challenge, but labor force re-entry by experienced workers may provide opportunities for some skill segments.

Temporary help employment declined again in July, but remains near its pre-pandemic all-time highs, and is just -1% below its pre-pandemic all-time high level of 3.001 million from October 2018. The industry is gradually descending from the pandemic era highs. This dynamic implies increased competitive pressures but continuing and large opportunities for those staffing firms that have developed a competitive advantage via either their technology, their service offerings, or both.

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