US labor market improvement in sync with non-farm payroll data

The United States labor market improvement remained consistent with the rebound in overall non-farm payroll growth on the month and the unchanged unemployment rate. The components for labor force participation, initial claims, average weekly hours, average hourly earnings, and job flows from unemployment to employment drove the July improvement, Barclays reported.

The Barclays Indicator of Labor Market Conditions rose by 0.04 in July, to 0.35, equal to where it stood last December. The index of Labor Market Momentum rose by 0.08 in July and momentum has now rebounded for two consecutive months, in line with the recovery in employment growth.

Even though the unemployment rate has stabilized for much of the year, the rise in participation relative to its underlying trend is indicative of stronger conditions. Over the past year, participation has remained the strongest contributor to the Indicator of Labor Market Conditions.

Further, both the above indicators are normalized to have a mean of zero and standard deviation equal to 1. The July readings indicate that labor market conditions and momentum remained above their two-decade average, consistent with continued improvements in the labor market, although at a slower pace, the report added.

"Taken alongside the June data, our assessment of labor market conditions and momentum point to a rebound in labor markets from their early-in-the-year weakness," Barclays commented in its research note.

Meanwhile, components supporting momentum include initial claims, employment growth, long-term unemployment, hiring plans, and, in particular, temporary help employment and average weekly hours. However, over the past year, participation has been the strongest contributor to the Indicator of Labor Market Conditions.