July Employment Report Shows Above-Trend Growth With Little Inflation

The July Employment Report shows above-trend growth continuing with little inflation pressures in Q318.  But, it suggests GDP Growth may come in below 4.0% (q/q, saar).

Payrolls slowed to +157k and the workweek dipped from its June high.  Total Hours Worked in July are 0.9% (annualized) above the Q218 average.   While a good start to the quarter, it will be difficult to match the 3.0% (q/q, saar) increase in Q218.  Productivity growth would need to jump to get GDP Growth above 4.0% in Q318.

The most interesting components of Payrolls were gains in manufacturing, construction and retail.  These are cyclical components and are strong.

Despite the slowdown in overall job growth, Q318 GDP Growth should be well above trend.  This is most clearly seen in the decline in the Unemployment Rate to 3.87%, below the 3.91% Q218 average.  Some of the decline could be a lagged effect of the very strong economic growth in Q218, but it likely reflects above-trend growth in Q318, as well.
 
Average Hourly Earnings rounded up to 0.3% m/m (0.259%), with the y/y steady at 2.7%.  The increase is slightly above the pace suggested by calendar considerations.  But, the m/m and y/y increases are in line with recent history.