Jobs Report, First Impressions

August 3rd, 2012 at 9:02 am

Employers bucked the recent slowing trend in hiring in July, sending payrolls up by 163,000, the largest payroll gains since February, according to this morning’s jobs report from the BLS.  The private sector was up 172,000, with most industries, including manufacturing, adding more jobs than in the prior few months.

On the other hand, the Household Survey, from which the unemployment rate is drawn (the payroll data come from a survey of workplaces), told a less optimistic story about July, with unemployment ticking up slightly and the share of the population employed falling.

So, what is one to make of such a tale-of-two-surveys? 

–Don’t read too much into one month as one month does not a new trend make.  July’s reversal of the recent downshift in payrolls is very welcomed, but let’s sees if it hangs around.

–Regarding employment growth, the payroll survey is a lot more reliable on a monthly basis than the household survey—it’s sample size is much larger and while all these monthly data are noisy, the payroll is less so than the household.  (The household survey goes to 60,000 households; the establishment survey, to about 140,000 businesses and government agencies representing about 490,000 establishments.)

–Re payrolls, when I find myself scratching my head about the underlying trend in a series that’s jumping around, I take an average, and the jumpier the monthly changes are, the longer the average.  So far this year, average monthly payroll growth has been about 150,000; over the past three months, the average has been about 100,000.

–Those growth numbers are about what it should take to keep the jobless rate around where it is, though continued months like July and it should start coming down.

–Average hourly earnings are up 1.7% over the last year, which is actually the same rate as inflation (that’s June12/June11 for inflation since we don’t have July’s price report yet).  Flat real paychecks are better than falling paychecks, but that’s a slow pace of wage growth, consistent with all the slack in the job market.

–Bottom line, a nice pop on payrolls.  Probably the most important thing to take from this morning’s report is that the downshifted trend of the last few months may not be as baked into the cake as we feared.

But keep your powder dry on this one.  There are lots of other economic headwinds out there, not least of which is a GDP growth rate below trend, and that’s usually associated with weaker job growth numbers than we saw from the payroll report.

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2 comments in reply to "Jobs Report, First Impressions"

  1. John Nail says:

    Jared, as always sane concise analysis.

    The one area I have seen no one get into detail on is the hard number impact of the housing depression on the UE.

    If 1.5-1.6M new housing starts is the norm in a decent economy and we have been averaging 500K, latest stats showing that is now around 750K annualized what is that gap adding to the UE on its own? Also related jobs for furnishings et al if housing and related is 17% of the economy?

    This and public sector jobs are the boat anchors on getting UE down.

    Thanks for answering this question.

    • davesnyd says:

      Maybe I’m asking the same things as John– but a little differently or more specifically:

      * Have your guys calculated what the employment numbers would look like if we didn’t have continuing cuts to the public sector? I think that goes directly to the gist of the President’s statement that the private sector was doing OK– I think his point was that most of our unemployment weakness now is due to public sector layoffs.

      * How much would it have cost to extend stimulus to have prevented those layoffs? How much extra tax $$$ would they have been bringing in? How many additional (multiplier?) jobs would have been created and how many extra tax $$$ would those have brought in? In short, had we better supported the non-Federal public sector with Federal stimulus dollars, would it have paid for itself?

      * If the housing sector righted itself, and there were additional jobs from construction, how would that change the employment picture? How does that play in to DeMarco’s refusal to adjust mortgages?