For the last two years, the US labor market’s strength has allowed the current administration to insist the economy is “strong as hell.” Indeed, how could economic conditions be abysmal when the country is adding as many as 904,000 new jobs in a single month? But now that the Federal Reserve is gradually breaking the economy as part of its inflation-fighting tightening cycle, reality is beginning to settle in. The July jobs report confirmed that anemia is taking hold of the US economic landscape.
July Jobs Report and More
According to the Bureau of Labor Statistics (BLS), the US economy added 187,000 new jobs in July, up from the downwardly revised 185,000 in June (more on that later). The non-farm payroll print fell short of market estimates for the second consecutive month. The unemployment rate dipped to 3.5% last month, down from 3.6% in June, and the labor force participation rate was unchanged at 62.6%. Average weekly hours dropped from 34.4 to 34.3. Average hourly earnings were flat at 4.4% year-over-year and 0.4% month-over-month. Both figures came in higher than expected.
What sectors added to their employment levels? Here is a breakdown:
- Health care: 63,000
- Social assistance: 24,000
- Financial activities: 19,000
- Construction: 19,000
- Wholesale trade: 18,000
- Leisure and hospitality: 17,000
- Government: 15,000
Two industries shed their staffing volumes: Professional and business services terminated 8,000 workers, and manufacturing trimmed payrolls by 2,000 (but the White House says manufacturing is booming).
The most fascinating component of the July jobs report is that the BLS has revised employment figures every month this year. In June, it was revised by 24,000 to 185,000. In May, total NFP employment was changed downward by 25,000 to 306,000. One or two months is normal, but seven months? In the immortal words of President Joe Biden, c’mon man!
Here are some of the other elements inside the July jobs report: Eight million people are working two or more jobs, the household survey shows 152,000 jobs, and the number of people employed part-time for economic reasons was little changed at four million.
Other Labor Data
In addition to the BLS NFP statistics, other July labor-related data showed a slowing job market. The number of job openings fell for the second straight month, clocking in at 9.582 million. Job quits slipped below four million. The monthly Challenger job cuts showed nearly 24,000 layoffs. Even the red-hot services sector is seeing signs of easing employment growth, with the Institute for Supply Management’s (ISM) employment sub-index heading toward contraction territory.
But the one industry that the US administration might not be happy about is manufacturing. The sector is in a recession, and the jobs are not showing up, despite touted investments. The ISM and S&P Global Manufacturing PMIs were stuck in contraction, with employment levels trending lower.
The Goldilocks Zone
Overall, this was a Goldilocks report for investors. It was not too hot and not too cold – it was just right. It is unclear how much this will impact the September Federal Open Market Committee policy meeting since there are still two inflation readings and another jobs report before the Federal Reserve convenes. But monetary policymakers will ostensibly home in on two figures: a 3.5% jobless rate and a 4.4% wage growth print. Still, the financial markets were ostensibly pleased with what they saw, with the leading benchmark indexes shrugging off the Fitch credit downgrade and rising around 0.6%. Many metrics show that Bidenomics has not been as successful as the administration claims. Once the labor market goes to the dogs, providing any supportive cause of the president’s economic doctrine will be a herculean feat.
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