Alicia Modestino, Associate Professor at Northeastern University, hosts this month's Workers by the Numbers Blogcast. Listen to her in conversation with Harry Holzer, Professor of Public Policy at Georgetown University, and Aaron Sojourner, Senior Researcher at the W.E. Upjohn Institute, as they discuss the Bureau of Labor Statistics’ jobs, wages, and unemployment report for July 2023. This conversation was aired live on the homepage of the blog at 8:45 AM ET on Friday, August 4—just 15 minutes after the release of the report.
Listen to the podcast here.
This in-depth conversation about the latest numbers examines this snapshot of the U.S. economy and what it means for workers, unions, and worker power.
Headline Numbers
Alicia began the conversation with the highlights from this report:
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Unemployment rate fell slightly from 3.6% to 3.5% in July, just above the lowest level since late 1969.
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The U.S. economy created 187,000 jobs in July, which was lower than economists had predicted (200,000) but level with the revised number from June (185,000). It was also below the average of about 300,000 jobs/month from the past year and the smallest gain since December 2020.
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Wages are up 14 cents in July, staying steady with the annual rate of 4.4% over the last year and a strong annualized growth rate of about 5% over the past 3 months.
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Most jobs gains in July occurred in the health care, social assistance, financial activities, and wholesale trade sectors. But more broadly, there is a broad slowdown of job growth and job creation across industries.
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Labor force participation is holding steady at 62.6 percent for the fifth consecutive month. Prime age labor force participation, which focuses on the 25-to-54 age group, had been moving up steadily, if incrementally, but edged lower in July to 83.4%. This is half a percentage point above where it was in February 2020 — just before Covid hit.
Is This Report Good for Workers, Bad for Workers, or is it a Mixed Bag?
Harry says the report is “good for workers”:
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“My view is that it’s good,” says Harry, “because I’m looking for a ‘Goldilocks’ labor market — not too hot, not too cool. The progress is getting more steady and sustainable. We’ve now seen two months in a row with below 200,000 jobs created, but that means we’re starting to get into a range of labor force and payroll growth that's sustainable and still strong by historical measures.
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Wage growth in the 4-5% range over the last three months coupled with inflation rates at 3% implies nice real wage growth for workers.
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We had a very good productivity growth number yesterday, the highest in the last three years. High productivity growth + ongoing strong labor market = more pressure on employers to share productivity growth with workers
Aaron agrees that the report is “good for workers”:
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The report shows signs of continued employer demand in labor market, moderation towards what the Fed will think is a more sustainable pace of growth.
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Over last three months, wage growth has been 4.9% at an annualized rate compared to 2.7% for price growth. That’s 2.2% real wage growth for every hour you’re working. You can buy more goods and services than you could three months ago. That is good news because ground is being made up after a recent spike in inflation.
Alicia made the “good for workers” decision unanimous:
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This report is not a huge jump but it’s consistent, steady, and a return to what we would’ve considered a healthy labor market pre-COVID which is job growth of around 180,000 per month.
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Along with the jump in productivity this month, we see good numbers with regard to GDP and consumer spending. People seem to be able to sustain a level of economic activity that keeps the labor market steady and healthy as we would want to see for a “soft landing.”
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And the wage growth we’ve seen implies that the current prosperity continues to be shared with workers, not just firms, and is even outpacing inflation right now.
Statistic of the Day
Harry
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Labor force participation rate stayed at 62.6%. We need to get payroll growth down so we don’t have an imbalance in the labor market between supply and demand.
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There are a few small indicators of slowdown in the labor market: weekly hours dropped from 34.5% to 34.4%. Temp employment, which is often pretty sensitive to business conditions, dropped 22,000 after dropping last month as well. Both of these statistics suggest a healthy cooldown in the labor market.
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Labor force participation among black men remains rather low.
Aaron
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Employment-to-population ratio: the share of Americans employed who are African-American compared to those who are white → historically for the last 50 years there has been somewhere between a 10-20% gap with whites having a higher employment rate than African-Americans. In March, for the first time, African Americans had a higher employment than whites. Then it started falling again, and this month it went up a little. We’re hoping for a smaller gap between the two populations and a more equitable outcome.
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For the full population, the black unemployment rate is twice as high as the white unemployment rate which is cause for concern.
Alicia
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Teenage labor market — it’s summertime, young people want jobs and the last two years have seen a strong labor market for teenagers. They are being offered jobs in greater numbers and with higher pay- for example big box stores like Target and Walmart are offering $17 per hour to start plus $2 per hour for nights and weekend shifts. We’ve seen historic highs in the summer teen participation rate and employment-to-population ratio since COVID.
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However, there is a gap between racial groups which indicates that a rising tide does not lift all boats and which has been widening this summer. The unemployment rate for white teens in July was 9.5% while for black teens was 20.7%. This gap is moving in the wrong direction–usually we should expect it to go down in July once teens land a job so we should keep an eye on this for the upcoming August report.
Does This Increase or Decrease Worker Power?
Harry
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What we’d all like to see is continued evidence of sustainable worker power at a level that’s sustainable. A few measures of that:
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Quit rate has been coming down and is almost back to pre-pandemic level which suggests more caution by workers.
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On the other hand, the labor market remains very tight — 3.5% unemployment, high vacancy rates. A tight labor market implies worker power.
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If we can keep the labor market tight, workers have the power to grab a bigger slice of productivity growth.
Aaron
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Big story: companies raised their prices and profits when there were supply constraints during the pandemic. Profit margins went up quite a lot and now we’re seeing an unwinding of profit margins. Corporate profits are still up 25% but wages are only up 14%, so there’s still room for labor market pressure by workers through quits, organizing, union contracts, etc. There’s a chance to share more of the value that’s created.
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As supply constraints loosen and competition increases, this can dampen price growth.
Alicia
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One positive force going forward is that demographics are on our side. Baby boomers accelerated retirement during the pandemic and are now moving into the age where they will be leaving the labor market. This will help us keep sustained pressure in the labor market because it won’t be easy for employers to replace workers in the longer-term.
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Plus when you have inflation running below wage growth that means workers have more money in their pockets. They can sustain consumer spending, feel more secure in the labor market, and continue to invest in human capital such as training or post-secondary education.
Alicia Modestino is an Associate Professor at Northeastern University’s School of Public Policy and Urban Affairs and the Department of Economics, as well as the Research Director of the Dukakis Center for Urban and Regional Policy. She previously served as Senior Economist at the Federal Reserve Bank of Boston.
Harry Holzer is the John LaFarge Jr. SJ Professor of Public Policy at Georgetown University, a Nonresident Senior Fellow at Brookings, and an Institute Fellow at the American Institute for Research in Washington, DC.
Aaron Sojourner is a labor economist and senior researcher at the W.E. Upjohn Institute for Employment research. He has served as a Senior Economist for labor at the White House's Council of Economic Advisors.
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