There was some good economic news issued this morning for a change, or at least somewhat better news. Specifically, at 8:30AM (EDT), the U.S. Labor Department reported that the nation added 117,000 jobs in July. That was better than the 75,000 generally expected, but it was still well short of the 200,000, or so, monthly job increase that we believe is necessary for the nation to significantly bring down its high unemployment rate. At the same time, payrolls for June were revised to show an estimated increase of 46,000 jobs; initially, that increase had been estimated at just 18,000. Also, May's earlier estimated increase of 25,000 jobs was lifted to a gain of 53,000. None of these monthly figures could be termed strong, as a simple calculation shows that the average monthly gain for these three months was just 72,000. That is, as we suggested, just about a third of the gain that would normally be needed to notably lower the jobless rate.
As for that rate of unemployment, it dipped from an unrevised 9.2% in June to 9.1% last month. A flat reading had been the expectation. Even so, that still left almost 14 million Americans who would like to work without a job. That is a troubling number, not only in human terms, but it is also in the fact that it is at a high enough level to put the limits on any attempt at a housing recovery.
It should be noted that the domestic economy slowed sharply in the first half, with back-to-back GDP growth of just 0.4% and 1.3%, in the first and second quarters of this year, respectively. Such tepid opening-half growth rates, and the subsequent dour readings on manufacturing, non-manufacturing, and personal consumption expenditures issued this week, and the sharp retreat in the stock market over the past fortnight have combined to increase the fears of a double-dip recession. That unenviable state of affairs was especially heard on August 4th when the Dow Jones Industrial Average plunged by 513 points and the rest of the market put in its worst showing in some two years. We think such talk is premature at this time, although we do opine that the margin for error on that score is decreasing by the day.
In all, this better-than-expected report should be greeted as at least modestly good news, if insufficient, in and of itself, to signal a major change in economic direction. In addition to the figures just noted, the past month also saw that the nation added 154,000 private-sector jobs in July. The private sector accounts for some 70% of all employment in this country. In June, the private sector added just 80,000 jobs. Also, included in this category is the manufacturing sector, where 24,000 jobs were created in July, twice the gain in June. On a less cheery note, the report also showed that 44% of unemployed Americans, or 6.2 million individuals, are now out of work for more than six months. Finally, average hourly earnings for all employees rose by $0.10 last month. Over the past year, wages are up only 2.3%. That, too, is insufficient to adequately lift consumer spending, in our opinion.
Overall, then, it was a better report than expected, though, on an absolute basis, it still fell well short of what is needed to get the economic ball rolling into high gear.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.