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By Jeremy Glaser and Robert Johnson, CFA | 08-01-2014 09:00 AM

A Good Month for Quality Job Growth

Morningstar’s Bob Johnson sees the addition of jobs in the higher-paying sectors and a stable hours-worked metric as good signs for the labor market.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser.

The U.S. economy added 209,000 jobs in July. I am here today with Bob Johnson, our director of economic analysis, to see just how high-quality some of those positions were.

Bob, thanks for joining me.

Bob Johnson: Great to be here today.

Glaser: Let's start with that headline number, 209,000. It was a little bit above your expectations of 200,000, below the market's 230,000. How do you look at these numbers?

Johnson: It's a very evened-out number, and I feel more confident that this is the right number. 209,000 also is the average number for the previous 12 months. So we were right on the average in July. We had a really great June number, which made up for some bad numbers during the cold winter months, and now we are back to the average number. The numbers are finally starting to make more sense again.

The year-over-year, month-over-month data are both good; we are at about 2% growth in the private sector and 1.8% when you throw the government workers in, which is very consistent with the kind of 2% GDP growth that I have been talking about.

Glaser: Where is this job growth coming from? There has been some talk that it's just restaurant jobs, or it's just hotel jobs, which are relatively low-paying positions. What sectors were adding in July?

Johnson: This was a good month for the quality of jobs. Actually, if you look at service-sector jobs--not meaning to demean anybody who works in those industries, but they just tend to be lower-paying or lower-hour jobs. But the number of services-sector jobs was considerably below the 12-month trend.

Meanwhile the construction jobs, the manufacturing jobs, the mining jobs were all above the trend of the last 12 months--maybe even double what the last 12-month trend has been. So the quality was very good. Restaurant jobs were a little slow, and hotel jobs were a little slow this month. The sectors that had been growing like a weed that everybody had been criticizing, well now the growth is coming from other parts of the economy, and we still held up the overall jobs growth number pretty well.

Glaser: What about education and health care--sectors that had been doing a little bit better over time?

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