A Look At The July Jobs Report

Includes: UDN, UUP
by: Max Fraad Wolff

July non-farm payrolls increased by 163,000 and the unemployment rate rose to 8.3% from 8.2% in June. Average hourly earnings increased 1.7% over the year. This is less than the rate of inflation and signals another period of declining real wages, or wages adjusted for inflation. These July numbers are better than recent months and move us back toward the 2012 average of 151,000 net new jobs in each month. However, it is worthy of note that the "civilian non-institutional" population increased by 199,000 in July (as per the Household Data Summary Table A BLS). The portion of the population in the labor force fell, and so did the total number of people employed in the U.S. The labor force participation rate and employment population ratios fell. These measures look at how many residents of the U.S. are in the labor force. The total number of employed people declined by 195,000 in July 2012 ( as per the Household Data Summary Situation Table A).

The broad U-6 measure of unemployment increased from 14.9% to 15%. This measure includes people who are marginally attached to the labor force or who are involuntary part time employees. 105% of the job growth was in the private sector. 172,000 new private sector jobs were created and the public sector, government, lost 9,000 jobs in July. 86% of job growth was in the service sector. Over 18% of job growth was in food and drinks hospitality services. Teen unemployment rates remain disturbingly high. White teens, ages 16-19, experienced 21.5% unemployment during July. African-American teens experienced an unemployment rate of 36.6% across July. Hispanic teens experienced unemployment of 29.4%

Among the major worker groups, the unemployment rate for Hispanics (10.3%) edged down in July, while the rates for adult men (7.7%), adult women (7.5%), teenagers (23.8%), whites (7.4%), and blacks (14.1%) showed little or no change (as per the BLS Employment Situation July 2012).

Wage and employment growth remain non-existent. This has created chronic insecurity among consumers. They are saving a bit more and not earning more. It has now been years without meaningful wage growth or a robust employment circumstance. The duration of this downturn is now an even greater issue than the depth of the slide. Few policy makers and forecasters seem to factor in and understand the role of duration in weak economic circumstances. The public mood is reflecting this reality. The lack of wage growth is likely to aggravate the response to rising food prices this fall in the wake of epic drought.

These numbers must be placed in context. The flow of macro data from the U.S. has been fairly bleak. Over the last few weeks we have seen weak ISM reports, auto sales, new factory orders. The Fed is approaching activity announcements between now and the Sept. 13 meeting. There is limited dry powder left for monetary policy and no chance of fiscal policy intervention. In my opinion, this White House and Congress simply cannot get anything done on any front -- no matter how pressing or essential. The economy -- including both the public and private sectors -- remain weak.

Here's a look at recent macro data:




National ISM


Weak -- Signals Contraction

Domestic Auto Sales

GM down 6.%, Ford down 4%. Overall Sales Up

Weak, purchase pace slowing

New Factory Orders

-0.5%, expected +0.5%

U.S. Manufacturing Slowing

The next two jobs reports will be fed directly into a heated national election cycle. This will add political heat and spin to the debate and increase the attention these numbers get. The payrolls and unemployment numbers will be ground zero in the presidential and congressional elections.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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