Jobs in July - Getting Worse More Slowly

by: Tom Lindmark

It may not have been a blockbuster, but the employment report from the BLS has to be viewed in a uniformly positive light. Most of the indicators were moving in a positive direction but we’re still talking second derivative moves here. Things are getting worse at a slower rate.

In July, 247,000 jobs were lost when most analysts had been looking for a fall of around 325,000. The May figure for lost jobs was revised downward to 303,000 from 322,000 and the June figure adjusted to 443,000 from the initial 467,000. All positive trends.

The unemployment rate fell unexpectedly to 9.4% from 9.5%. Almost nobody sees anything in this other than a statistical quirk. The number of individuals looking for work fell thus dragging down the percentage number slightly.

Two good developments were an increase in hourly earnings were up 0.2% and the work week increased from 33.0 hours to 33.1 hours.

The big negative that I picked up from the report was the concentration of job growth in healthcare, education and government. By and large, the larger economy did not fare as well as the numbers might suggest. Essentially, the sectors of the economy that rely to a large extent on government spending were the sectors that show improvement. Not a good omen.

From the Wall Street Journal Real Time Economics blog, here are some economists views:

  • July’s Employment Report is the gift that keeps on giving. Nearly every element of it is positive. Most notably, non-farm payrolls fell by a more modest 247,000 last month, the smallest decline since August 2008. Admittedly, a decline in employment of that magnitude still seems hard to square with the growing speculation that the recession ended around mid-year. Looking back, however, the economy lost 265,000 jobs in the first month of the recovery in 2001 and 226,000 jobs in the first month of the recovery in 1991. –Paul Ashworth, Capital Economics
  • Today’s news on employment was far better than expected but a mix that portrays near term optimism that the economy is turning the corner but some indications that the loss in earnings power will be weighing on growth for some time to come. The better numbers reflect hiring by the auto industry and Federal government and a sharp slowdown in the reduction of jobs by temporary employment services. But people aren’t spending and the retail industry continues to lose jobs at an accelerating pace, in particular general merchandise stores. –Steven Blitz, Pangea Market Advisory
  • This was unambiguously a good report, considering the circumstances, and it was far better than what the market was expecting. More importantly, with the fall-off in the pace of job losses appearing to be gaining some traction and the improved tone of other economic reports, it appears that the U.S recession may well be in its last throes.r –Millan L. B. Mulraine, TD Securities
  • While on the face of it this report was “good” news, we are more than a bit suspicious of the result given the preponderance of evidence that points to worse conditions. However, whether or not today’s report overstated the case, the improving trend of the labor market after the autumn/winter carnage cannot be denied. What is still very much open to question is how fast the move will be to stabilization of payrolls and eventually to job growth. We continue to believe that the process will be a slow one, and that households will be contending with weak income growth and balance sheet issues for some time. –Joshua Shapiro, MFR Inc.