Friday, September 7, 2007

Employment Report Stinks

From the BLS:

Nonfarm payroll employment was essentially unchanged (-4,000) in August, and the unemployment rate remained at 4.6 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Over the last 3 months, total payroll employment changes have averaged 44,000 per month and private sector employment changes have averaged 72,000 per month (as revised). In August, employment in manufacturing, construction, and local government education declined, while job growth continued in health care and food services.

The details aren't very good.


Manufacturing employment declined by 46,000 in August. This industry has lost 215,000 jobs over the past year. In August, declines were widespread among component industries. Within durable goods, there were job losses in motor vehicles and parts (-11,000), machinery (-7,000), wood products (-7,000),furniture and related products (-4,000), and semiconductors and electroniccomponents (-4,000). In nondurable goods manufacturing, job losses continued in apparel (-4,000) and in textile mills (-2,000).

In addition,

Construction employment declined in August (-22,000), with most of the loss occurring among residential specialty trade contractors. Since its most recent peak in September 2006, construction employment has fallen by 96,000.

"Blue collar" employment isn't doing very well. Manufacturing has been shedding jobs for the last year, and the decline in construction employment indicates the housing slowdown is finally translating into job losses.

In addition, gains were in low-paying sectors. Education and health services added 63,000 jobs, and "leisure and hospitality" (read, "do you want fries with that?") added 12,000. These lower paying sectors are where job growth was strongest.

Yesterday, Bob Pisani wrote the following on his blog:

The jobs report. This leaves tomorrow jobs data as the key economic report before the Fed meeting September 18th. There have been some signs of weakness in the employment trends recently. Very strong data will clearly reduce the chances of a cut; very weak data will revive the belief a cut is imminent. The worst case scenario for the stock market is a jobs report that is in line or just slightly below expectations; this will leave traders confused about the Fed's intentions and put more weight on the weekly jobless claim numbers.

I think Pisani is correct in his analysis here. This number is clearly negative and all really ups the probability of a rate cut at the next Fed meeting.