A disappointing July jobs report came out today showing weak employment gains, further evidence that the economy is stalling out. While the headline was that the 9.5% unemployment rate didn’t change, private job create was anemic at only 71,000 new jobs. That was not sufficient to overcome the longer-term effects of joblessness as the broader rate of unemployment, the “U-6″ rate, stood unchanged at 16.5%. Roughly 6.6 million (45%) workers have been unemployed for more than 27 weeks. About 14.6 million workers are unemployed or underemployed.
What was unsettling to the markets was the downward revision of June’s numbers that increased unemployment by another 96,000 workers. An average of less than 100,000 new jobs per month is insufficient to offset job losses and show job growth. Many economists say we need at least 200,000 new jobs created every month to start chipping away at the unemployment level.
Slight gains were seen in the average workweek and average pay.
The big cuts were in government hiring as states and local government shed jobs and as Census workers jobs have come to an end. The 71,000 job increase in the private sector was seen as anemic and below economists’ forecasts.
Some of the highlights from the BLS report today:
Within the private sector, employment gains continued in manufacturing, health care, and mining. Manufacturing employment rose by 36,000. Most of the gain occurred in motor vehicles and parts manufacturing (+21,000), as some plants deviated from their normal practice of shutting down in July for retooling. Motor vehicles had added 32,000 jobs during the first half of the year.
Employment in fabricated metals increased by 9,000 over the month. The manufacturing workweek rose by one-tenth of an hour in July, after falling by half an hour in June.
Health care employment grew by 27,000 over the month. Since the recession began in December 2007, health care has added 665,000 jobs. Employment in mining rose by 7,000 in July, largely in support activities.
Employment in temporary help services was nearly unchanged for the second month in a row. Job gains had averaged 45,000 per month from October 2009 through May.
Construction employment was little changed in July (-11,000). A strike in the industry reduced payrolls by 10,000.
Financial sector employment continued to trend down over the month (-17,000), though the pace of job loss has been slower this year. Thus far in 2010, monthly job declines have averaged 12,000, compared with 29,000 in 2009. Employment in most other private sector industries was little changed in July.
The consumer credit report also came out today showing a continued decline. It was a negative $1.3 billion in June, down 4.5% annually. It slowed its contraction due to a good auto sales market (i.e., nonrevolving credit which was down by only 1.4%). But revolving credit, basically credit card debt, was down $4.5 billion in June or down 10.5% annually.
Your political representatives continued to snipe. President Obama said words to the effect that it takes time to climb out of a big hole especially one that he didn’t dig. Rahm Emmanuel, the President’s Chief of Staff, said that that the business community just doesn’t understand the Administration. The Democrats are trying to pass bills to aid small businesses and bailout state and local governments. “We need to do what’s right, not what’s political, and we need to do it right now,” the President said. Nancy Pelosi said that at least the Democrats were doing better than did George Bush. The Republicans claim that Obama’s stimulus policies aren’t working. McCain and others just released a report highlighting some wasteful spending from the Recovery Act. I am confident the Republicans have no idea what to do either. Yawn.
What to watch for: the Fed’s Tuesday meeting. As I reported in my article, “Is A Shift In Fed Policy Coming?,” they are facing increasing pressure to thwart what they see as deflation, and right now inflation would look good to them. We’ll see if the anti-deflationists ( President Bullard) or the anti-inflationists (President Hoenig) have it out. My guess is that they will vote to continue existing policy but will “stay vigilant against future weakness,” which will be a sign that they are worried, but don’t yet know what to do. I believe the economic data will continue to weaken and when unemployment ticks up, they will start increasing Open Market Operations in an attempt to create inflation.
Jeff:
Thanks for the analysis. I think the two most “telling” aspects of recent reports are (1) temporary employment has stopped increasing and (2) the denominator in the unemployment calculation (total labor force) has dropped for three months in a row.
These two stats convey that overall improvements in employment have stalled. Where we go from here is impossible to know, but a rise in the unemployment rate (due to a rising denominator) would be a leading indicator of an improved jobs picture.
Weak employment data is consistent with a demand recession and an economy still going through de-leveraging. Government (& Fed) policies trying to bring the US back to 2005-2007 demand levels are a waste of time–it won’t work.
We’ll have to keep an eye on temp numbers. The overall temp numbers have been way up, but you are correct, if they are sliding, that would be another negative indicator. Good point.