July Jobs Report Better Than Expected, But Still Not Very Good
There is little to cheer in the jobs report released by the Labor Department today.
Going in to today’s release of the July jobs report from the Labor Department, the consensus forecast was for a gain of between 75,000 and 85,000 net new jobs, so people breathed a sigh of relief when the numbers turned out to be better than expected:
Hiring picked up slightly in July and the unemployment rate dipped to 9.1 percent, an optimistic sign after the worst day on Wall Street in nearly three years.
Employers added 117,000 jobs last month, the Labor Department said Friday. That’s better than the past two months, which were also revised higher.
The mild improvement may ease investors’ concerns after the Dow Jones industrial average plummeted more than 500 points over concerns that the U.S. may be entering another recession.
“Huge sigh of relief in the markets that we got a relatively good number—not an absolutely good number but a relatively good number. And don’t underestimate how important that is,” Mohamed El-Erian, co-CEO of bond manager Pimco, told CNBC.
Businesses added 154,000 jobs across many industries. Governments cut 37,000 jobs last month. Still, 23,000 of those losses were almost entirely because of the shutdown of Minnesota’s state government.
The unemployment rate fell partly because some unemployed workers stopped looking for work. That means they are no longer counted as unemployed.
The report follows a string of gloomy data that shows the economy has weakened.
But the government revised the previous two months’ totals to show hiring wasn’t as weak as first estimated.
The economy added 53,000 in May, up from an earlier estimate of 25,000, and 46,000 in June, up from 18,000. June’s total was still the weakest in nine months.
Hiring in July was broad-based. Manufacturers added 24,000 jobs in July, as auto companies laid off fewer workers in July than usual. Retailers hired a net total of 26,000 employees. Employment in health care grew 31,000. Hotels and restaurants added 17,000.
So, slightly better than we expected but also plenty of caveats. For one thing, labor force participation in July was 63.9%, the lowest it has been since January 1984. If the labor force participation rate were at the same level it was when President Obama took office, the unemployment rate would be closer to 11.2%. For another, the number of jobs added is far below what would be needed to lead to full recovery:
To regain all the losses in the labor force since the December 2007 start of the great depression, which at this point are 10,596,000 when adding the 3,870,000 growth in the labor force over that period together with the 6,726,000 cumulative jobs lost, somehow America needs to add 16,356,500 jobs over the next 64 months. Good luck America.
Good luck indeed.
At the very least, these numbers are likely to put a halt to the slide in world stock market that started with yesterday’s bad, bad day on Wall Street. Indeed, that is exactly what appears to be happening this morning. Nonetheless, the forecasts for the market, and the economy for the rest of the year are hardly good:
The rough ride for equities may not be over, according to the charts. After losing 500 points on Thursday, the Dow could drop another 700 point before finding some support, Darryl Guppy, CEO of Guppytraders.com told CNBC on Friday morning.
With the head and shoulder pattern in the Dow, it’s giving us a downside target projection of around 10,600,” Guppy said, after Wall Street suffered its worst sell-off since early 2009.
“The key factor is we are now beyond the crossroads,” he warned, “For instance the S&P, we’ve moved below the neckline value and we’ve moved below the neckline value in the Nasdaq.”
He thinks the Nasdaq could hit 2300, a 250 point move down from Thursday’s close; and the S&P 500 could hit 1140.
In other words, we are hardly out of the woods yet. Today’s report is better news that I was expecting given the economic figures that had already come out for July, but it’s nowhere near recovery level, and I don’t see how we get to that point anytime in the next six months to a year.