Job growth fell short of expectations in the economy in July after robust hiring over the past several months. Labor market conditions remain tight, however, as the unemployment rate neared historic lows at the start of the 3rd quarter. Within trucking, hiring continued to improve a solid pace in July despite the moderating job growth in the overall economy.
The Bureau of Labor Statistics reported that the economy added 157,000 workers during the month, down from an upwardly-revised gain of 248,000 in the previous month. This falls well short of consensus estimates of 190,000 and is the smallest monthly gain in employment in four months. Employment growth during the month was again led by the service sector, where large gains in professional services and health care helped to drive overall growth in the economy. This helped to offset some of the softness in the retail sector, which was weighed down by the closing of Toys R Us stores during the month. On the goods side of the economy, manufacturing continued to be the standout, as the 37,000 jobs added in the sector accounted for over 70% of the goods-related payroll gains during the month
It is worth remembering, however, that 157,000 jobs added is still a healthy number. Over the past five years, the labor force has expanded by a little over 100,000 each month. Workers have joined the labor force at a faster pace thus far in 2018, but the current pace of employment growth has been enough to keep pace with the economy. Despite the moderation in payroll employment, the unemployment rate fell to 3.9% in July, down from 4.0% in the previous month.
Trends in freight hiring
Trucking employment rose for the third consecutive month in July, as the industry added 4,400 jobs to payrolls during the month. Jobs within trucking have increased in ten out of the past eleven months as carriers in the industry scramble to expand capacity to meet freight demand. Trucking employment is now 1.8% higher than at this point last year, which continues to exceed the pace of job growth in the overall economy. Other modes of freight saw smaller gains during the month, as rail, ocean, and air transportation all registered less than 1,000 jobs added in July. Couriers and messengers, which primarily handle smaller parcel shipments, added an impressive 7,600 workers to payrolls in July as surging e-commerce sales continue to fuel the need for residential package deliveries.
The improvement in trucking hires serves as a sign that capacity is slowly beginning to come back to the market. Still, the industry is likely to face a capacity crunch, as this pace of hiring is not enough to keep up with the rapid growth seen on the goods side of the economy.
Behind the numbers
The headline jobs number was a bit of a disappointment, but the overall employment report this morning was still generally positive. For one, 157,000 is not a weak number by any means. Given the tight labor conditions, it is reasonable to expect that the pace of hiring is going to gradually slow going forward anyway as employees struggle to find qualified labor. Plus, the previous months’ data was revised up by over 50,000 jobs, offsetting the underwhelming July performance relative to expectations.
On the trucking side, this month’s results fall in line with what we have been seeing in recent months, with capacity looking like it its gradually returning to the market. It appears that carriers’ efforts to increase wages and benefits to attract and retain workers is taking some hold, but again, more needs to be done.
The labor reports over the past few months have taken on a particular interest with many searching for signs that all of the talk of tariffs and trade wars would begin to curb hiring plans. For now, worries over the effect that tariffs will have on the economy appear to be just worries. There doesn’t seem to be much evidence in the employment data that businesses are looking to hire any less than they did before.
Ibrahiim Bayaan is FreightWaves’ Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary by subscribing