- by New Deal democrat
My Big Theme for the past few months has been that the AI Boom (or possibly bubble) is counterbalancing a stagnant or even shallowly recessionary rest of the economy. After three good reports in a row, the June employment report had been very weak, and July was even worse - but with a MAJOR caveat. Take out the -49,600 loss in local government education jobs, and we eked out a +27,000 gain for the month — still pretty poor. But the goods production portion of the economy continues to be a bright spot.
Below is my in depth synopsis.
HEADLINES:
- -23,000 jobs lost. Private sector jobs increased 30,000, while government jobs subtracted -53,000. As per the above, almost all of those government losses were in local education, and almost certainly because of the difficulty with seasonal adjustments as there are always big layoffs in this sector for the summer months. The three month average rose declined to a meager 20,000.
- The pattern of downward revisions to previous months once again occurred this month. May was revised lower by -66,000, and June was revised lower by -37,000, for a total decline of -103,000.
- The alternate, and more volatile measure in the household report, declined once again, by -87000 jobs. On a YoY basis, this series was negative for the sixth month in a row, now sharply down by -963,000 jobs, or over -80,000 per month
- The U3 unemployment rate declined another -0.1% to 4.1%.
- The U6 underemployment rate declined -0.1% to 7.9%.
- Further out on the spectrum, those who are not in the labor force but want a job now declined -125,000 to 5.920 million, the 2nd lowest number in the past 12 months..
Leading employment indicators of a slowdown or recession
These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn vs. rebounding. These were almost entirely positive.
- The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, was unchanged at 41.7 hours, the highest number in 5 years, just surpassing its 2021 peak.
- Manufacturing jobs rose 5,000, the 4th increase in the last 12 months.
- Truck driving reversed its decline ever so slightly, by +100.
- Construction jobs rose +22,000.
- But Residential construction jobs, which are even more leading, declined -500, taking out their interim low from last April, and setting a new 3 year low.
- Goods producing jobs as a whole rose +25,000.
- Temporary jobs, which had declined by over -650,000 since late 2022, rose by +3,400, continuing to improve from their post-pandemic low set last October.
- The number of people unemployed for 5 weeks or less declined -222,000 to 1.960 million, the lowest number in over 3 years.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.04, or +0.1%, to $32.40, for a YoY gain of +3.2%, except for one month the lowest since December 2019. This is also lower than the 3.5% YoY inflation rate as of May.
Aggregate hours and wages:
- The index of aggregate hours worked for non-managerial workers *declined* another -0.1%, and is up 0.8% YoY, about average for the past 12 months.
- The index of aggregate payrolls for non-managerial workers rose only +0.1%, and is up 4.1% YoY, tied for the second-lowest comparison for the past 5 years, and only 0.6% above the YoY inflation rate through June.
Other significant data:
- Professional and business employment rose for the fourth month in a row, by +18,000. These tend to be well-paying jobs. This remains above its low from last October, and has turned higher YoY as well.
- The employment population ratio declined another -0.1% to 58.9%, vs. 61.1% in February 2020, and its lowest since October 2021.
- The Labor Force Participation Rate declined -0.1% to 61.4% , vs. 63.4% in February 2020, and the lowest since February 2021. IMPORTANT: both the EPOP and LFPR are greatly affected by the retiring Boomer population. In the prime age 25-54 demographic, they are virtually unchanged.
SUMMARY
Lat month I described June’s report a “a big stumble.” If so, on the surface at least, this month was a faceplant. It was the 5th absolute decline in the past 12 months. Only 316,000 jobs, or an average of 26,000 per month, have been added in that time. This is just barely holding its head above water, even with the net loss in immigration.
That being said, the report was not nearly as bad as the headline. As indicated above, almost -50,000 of the -53,000 decline was accounted for by local government education jobs. Big layoffs in this sector happen every summer, and are notoriously difficult to seasonally adjust for, and thus there are often one or more outliers during those months. But as per the discussion above, almost all of the leading indicators in the report increased in manufacturing, construction, truck transportation, and goods production in general. Further, as per my weekly discussion about jobless claims, the unemployment rate did decline another -0.1% to a 12 month low.
But there were other negatives as well, with very weak average and aggregate wage growth, and another actual decline in hours worked. It is possible that, once we have the July CPI number, that real aggregate payrolls will have turned negative YoY, which would be a powerful recession warning signal.
Leaving aside the education jobs issue, I would describe this report as being just on the plus side of being dead in the water.
