July Jobs Report: Modest Job Growth Narrows Racial Employment Gap

Bernard E. Anderson, PhD

Whitney M. Young Professor Emeritus,
The Wharton School of the University of Pennsylvania

Chief Economic Advisor,
National Urban League

July's modest job creation, coupled with evolving labor market tightness, generated improvement in racial employment opportunities.

Over the past several years during the post-pandemic revival of the economy the Black/White gap in unemployment narrowed to 1.63, much below the previously long-term 2:1 ratio.  The Hispanic unemployment rate remained unchanged at 5.3 percent.

These conditions contributed to the declining cost of living. On July 31, the federal open market committee, the body that sets monetary policy, kept the federal funds rate at 5.25 to 5.50 in the effort to reduce elevated inflation and bring the rate down to 2.0 percent. Chairman Jerome Powell signaled the expectation that if incoming data suggests sustained reduction in inflation, FOMC might reduce the rate at the September meeting.

 The economy created 114,000 jobs in July, falling short of expectations, and the unemployment rate ticked up to 4.3 percent. The Black unemployment rate was unchanged at 6.3%

The labor market shows better balance, receding from the tight labor markets observed in 2023.  The labor force participation rate edged up to 62.7 percent, and the employment/population ratio remained at 60.0 percent.  Long-term unemployment settled at 1.5 million, or 21 percent of total unemployment.  Average hourly earnings were $35.07, 3.6% above the level in 2023.

Most job creation was in a narrow range of industries: health care, construction, transportation, and leisure/hospitality. The industry mix of job creation, mostly services reflect both the aging population and modest consumer spending.  Service industries accounted for two thirds of job creation.

In conclusion, the economy is on the path for a soft landing - - - a process in which restrictive monetary policy reduces inflation without creating a recession.  That would benefit all population groups.