Here’s a clear sign the U.S. jobs market is getting weaker: Fewer businesses are hiring.
The U.S. added a solid 187,000 new jobs in July, but almost half of the hiring was concentrated in a handful of industries.
A measure in the monthly jobs report compares the percentage of industries hiring to the percentage of those losing jobs. This is known as the diffusion index, and it can reveal trends about the larger economy.
The index fell to 57.2% in July from 58.8% in June, the second lowest reading since the onset of the pandemic.
Just a year and a half ago, nearly 85% of all industries were hiring. That’s the highest level ever based on records going back to 1991.
Nearly half of July’s new jobs, 87,000, were created in health care and social assistance (day care, elderly care and so forth). That’s a continuation of a trend in 2023.
Leisure and hospitality businesses, like hotels and amusement parks, saw a jump in hiring with 17,000 new jobs. There were also 15,000 new government positions.
Healthcare, government and leisure and hospitality account for almost 63% of all jobs created in 2023. The same industries accounted for 44% of new jobs in 2022.
An employment report from payroll processor ADP on Wednesday showed that almost two-thirds of new jobs were in leisure and hospitality in July. The report said the U.S. added 324,000 private-sector jobs last month.
Other industries lost jobs in July. There were 22,100 fewer temporary help roles for professional businesses, and 8,400 fewer transportation and warehousing jobs.
The shrinking number of industries hiring appears to be sign of erosion in the labor market, something the Fed is looking out for as it considers raising interest rates to combat heightened inflation.