Job Creation Jumps in July, Bolstering Economy Against Other Headwinds

Hiring accelerates in July, underscoring labor market strength. Concerns over the economy’s trajectory, following the reporting of GDP contractions in the first two quarters, may be somewhat assuaged by the robust jobs figures posted for July. Last month employers created 528,000 positions, the second-highest total for the year and a 32 percent increase over hiring in June. These new hires bring the total employment base back to the February 2020 level, with additional private sector roles offsetting a reduction in the public sector. These gains have also restored the unemployment rate to 3.5 percent, tying the record low achieved just before the main onset of COVID-19 in the U.S.

High skill hiring bolsters demand for top-tier apartments. Architecture and engineering firms, consulting companies, and scientific research and development organizations all added more than 10,000 personnel apiece last month. Many of these positions require specialized skills that are well compensated for, improving incomes and creating demand for housing. Given elevated single-family mortgage rates, much of this demand will focus on Class A and B rentals. At 3.8 percent and 3.2 percent, respectively, in June, Class A and B vacancies have rarely been lower over the past 20 years, despite recent ample development. While elevated inflation and rapid rent climbs have moderated household formation of late, as prices start to stabilize, more individuals will pursue leases.

Accelerated employment growth means Fed is not done. While the July employment surveys were conducted prior to the Federal Reserve’s second 75-basis-point rate hike late that month, the strong hiring only reinforces the likelihood of an additional rate increase at the central bank’s September meeting. Letting some steam out of the hot labor market, particularly in regards to wage increases, is a key part of the Federal Open Market Committee’s plan to temper inflation. Average pay was up 5.2 percent year-over-year in July, above the historical average but below a recent peak.