The jobs report absolutely crushed expectations on Friday, and under the hood there was definitive proof that companies are simply running out people to hire.
Obviously, the headline numbers looked great. 255,000 jobs added in July, well over the 180,000 expected by economists. Additionally, the unemployment rate held at 4.9% as the labour force participation rate ticked up to 64.8%.
One of the under-the-hood numbers that caught our eye, via Conor Sen of New River Investments on Twitter, was the unemployment rate for people without a high school degree.
For that group, the rate dropped to 6.3%, a massive 1.2% plunge from the month before. Now, there is probably some month-to-month volatility here, but this is the lowest figure since October 2006 and indicates that businesses are moving well down the skill scale to find employees.
Equally as encouraging, the drop in unemployment for people with a high school degree came even as the number of people in this category came into the workforce, meaning it wasn’t just a decline in their participation rate causing the change.
Additionally, the unemployment rate for teenagers fell by 0.4%, to 15.6%. The number may have been impacted by students finding summer employment, but it also shows that businesses are willing to hire less-skilled workers to fill roles.
Both of these are significant because these groups are typically what you would think of as the hiring of last resort. Coming out of a recession, businesses are most likely to hire highly-skilled and educated workers first. Then as the cycle goes on, those high-skilled workers get snapped up, causing businesses and firms to move down the skill scale to lower-skilled and less educated workers.
As Business Insider’s Akin Oyedele noted, the stretch to find any worker to hire will drive up wages as businesses try and attract talent. This could put some pressure on small businesses to compete with larger firms’ wage offerings, but is certainly good news for workers looking for a raise.
By the way, wages in the jobs report also came in at their highest since the Great Recession.
Now, with job openings near an all-time high and businesses taking a record amount of time to fill a job, it appears that the falling unemployment rate for these younger and less educated workers proves that there is little slack left in the US labour market.