July Employment Report Post-Mortem

by: The Fundamental Analyst

July non-farm payrolls rose a seasonally adjusted 117,000 in May according to the BLS (click to enlarge images):

Revisions to the prior two months totaled positive 56,000. Government continued to be a drag on employment with -37,000 government jobs lost during the month against 154,000 added in the private sector. Of course there is a lot of noise in the month to month numbers, hence why the chart above shows the 3 month moving average (3MMA). The 3MMA is now running at 72k down from 215k in April. Don’t expect a rebound in the 3MMA back to 200k any time this year.

The unemployment rate fell slightly to 9.1%, not as a result of employment growth but because -193k
workers dropped out of the labor force. The labor force participation rate at 63.9% is now at levels not seen since January 1984.

Three and a half years after the peak in employment and the US labor force is still almost 5% below that peak. Another three and half years at current trends wouldn’t even get close to the previous peak and a recession, which is looking increasingly likely, will put that back even further.

Average hourly earnings increased 8 cents but year over year growth remains at an anaemic 2.3%. The work week remained unchanged at 34.3 hours. The positive revisions to prior months render this report better than expectations but as far as the overall employment picture for the US, it is no better than treading water.