Everything you need to know about today’s big jobs report

August 2, 2013

(Nicholas Kamm/AFP/Getty Images)

The July jobs numbers are out, and we're here to give you quick-fire analysis of the report. Follow along as we make sense of it in in real time.

[liveblog]

How markets reacted

Financial markets interpreted the jobs numbers as moderately negative for the economy. The stock market was down at 10:00 a.m., off 0.3 percent as measured by the Standard & Poor's 500 index.

The bond market rallied, meanwhile, with the yield on a 10 year Treasury bond falling .08 percent to 2.625 percent, retracing most of a huge jump on Thursday. That reflects investors concluding that soft jobs data will make the Fed slower and more cautious in exiting from its easy money policies.

Indeed, on Thursday futures markets implied a 41 percent probability that the Fed will raise interest rates by the end of 2014. After the report Friday, those odds fell to 38 percent.

Number of part-time workers still rising

One of the more disappointing trends over the last few months is that job growth has been strongest in low-paying sectors that tend to offer lots of part-time jobs, particularly in retail and leisure and hospitality. Obamacare may also be affecting employers as they wrestle with the health care mandates, though the evidence is still uncertain.

The number of people working part time for economic reasons -- they couldn't find full-time work or had their hours cut back by their employer against their will -- rose by 19,000 in July. Since March, that number has risen by a whopping 607,000.

What does it mean for the Fed?

With the Federal Reserve weighing when to begin slowing the pace of its $85 billion in monthly bond purchases, each unemployment report (and inflation report, and so on) takes on extra importance right now. How are Fed officials likely to interpret these numbers, and will the July report augur for tapering the purchases sooner (September) or later (December or beyond)?

On one hand, the unemployment rate came down significantly, to 7.4 percent from 7.6 percent. That gets us closer to the thresholds that the Fed has sketched out -- that it will end its quantitative easing policies when the jobless rate is around 7 percent and consider raising interest rates when it gets to 6.5 percent or below. Thu, it supports winding down bond purchases sooner rather than later.

But not so fast. The Fed has gone to great lengths to assure that they are making these judgments based on the strength of the job market as a whole, not that one unemployment number. And given that the jobless rate fell in large part because people dropped out of the labor force, that is not going to automatically have Chairman Ben Bernanke reaching for the "taper" button on his desk. (Note: There is not, as far as we know, such a button on Ben Bernanke's desk)

And the tepid numbers on payrolls, of only 162,000 jobs added and a downward revision for previous months, also appears to support caution in removing monetary accommodation.

Overall, the unemployment numbers help make the case for winding down purchases later rather than sooner, though there is lots more data to digest before the next Fed policy meeting, including the August jobs report.

Negative trends on hours and wages

Another disappointing element of the July jobs report was weakness in measures of worker compensation, which had been a bright spot in June.

For all private employees, average weekly hours worked fell to 34.4 from 34.5, and average hourly earnings ticked down two cents to $23.98. That was enough to push the index of weekly payrolls down 0.3 percent, following an 0.6 percent rise in June.

Where did the jobs come from?

So, what sectors were the big gainers, and the big disappointments, in the July jobs report?

First, the winners:

Retail. This sector has been on a hiring tear in recent months. There were 46,800 more retail jobs added in July, and job creation in the sector has averaged almost 40,000 jobs a month for the last three months. Apparently, consumers are buying, and retailers are staffing their stores to fulfill the demand.

Professional and business services. A stalwart of job creation through the sluggish recovery of the last few years, the sector added another 36,000 jobs in July. Unlike some months, the hiring wasn't driven overwhelmingly by temporary jobs, which are counted in this category. Only 7,700 of those positions were in temporary services.

Leisure and hospitality. Like retail, this sector has been zooming forward, and it added another 23,000 jobs in July after an average of 50,000 a month in May and June. Americans seem to be going to hotels in restaurants in droves, or at least enough for restaurateurs and hoteliers to staff up.

Government. True, the government employment sector added only 1,000 jobs, and so was effectively unchanged. But the absence of a negative sign is actually progress. It compares with an average of 9,500 jobs lost in May and June. The federal government excluding the post office, dealing with spending cuts and the sequester, nonetheless added jobs, and local governments added 6,000 positions, suggesting that the long bleed  may be ending.

And the jobs day disappointments:

Construction. So much for the housing rebound producing a resurgence in construction employment. The sector shed 6,000 jobs in July, continuing a run of uneven results.

Other services. This grab bag category of employment includes the nonprofit sector, and it shed 2,000 jobs.

 

Why did the unemployment rate fall?

The pleasant surprise in an otherwise tepid jobs report was a drop in the unemployment rate, to 7.4 percent from 7.6 percent. But as we've all learned by now, you can't take changes in the unemployment rate at face value. They can be good, bad or indifferent depending on whether they are driven by more people having jobs or people giving up looking for a job.

In this case, it's all of the above. The number of people reporting that they are employed rose by 227,000. Good! The number of people who did not have a job but were looking for one fell by 263,000. Also good! But the number of people not in the labor force rose by 240,000, driving down the labor force participation rate. Bad!

The single indicator of the health of the job market that can sum all that up is the employment to population ratio, which was unchanged at 58.7 percent.

Unemployment rate falls to 7.4% as 162k jobs added

The numbers are in! The Labor Department reported that employers in the United States added 162,000 jobs in July, compared with a revised 188,000 in June. Revisions to May and June subtracted 26,000 from the earlier estimates of jobs added. That's the bad news: That's a bit below recent job market measures and thus a disappointment.

The better news: The unemployment rate fell to 7.4 percent, from 7.6 percent. Simultaneously more people had jobs, fewer people were unemployed and fewer people were in the labor force.

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Neil Irwin · August 2, 2013