July’s Employment Report (Updated for ISM Non-Manufacturing Report)

Predictions and Precursors:

• ADP’s Employment Report came in Wednesday at 48,000 new nonfarm private payroll jobs.
• The consensus (here) is that about 135,000 new jobs were created in July, and that the current unemployment rate of 4.5% would stay the same.

The Report (BLS release is here):

• Unemployment — 4.6%, unchanged up 0.1% (predix: some in the press will jump on this as the imminent arrival of Armageddon)
• New Establishment Survey Jobs — +92,000
• Revisions to previous months — May, -2,000 (from 190,000 to 188,000); June, -6,000 (from 132,000 to 126,000).
• Net change in new jobs, including revisions to prior months — +84,000 (92 – 2 – 6)
• Change in number of people working per the Household Survey — minus 30,000.

Quick Thoughts:

July was not a good month at all for employment growth, but I would guess that the stock market won’t consider the report to be terribly relevant compared to other influencing events.

This is when housing construction and home-improvement activity should be at its peak, but both industries are in a slump. Given the difficulties there, it’s gratifying that total construction employment was down by only 12,000 jobs.

On the positive side, employment in most non-governmental service sectors grew nicely (education and health care, + 39; professional and business, +39; leisure and hospitality, +22). This would appear to bode well for the ISM Non-Manufacturing Index to be released at 10 AM today (not so – See Update below).

Here are a couple of interesting numbers — Black/African-American and teenaged unemployment fell pretty sharply — from 8.5% to 8.0% and 15.8% to 15.2%, respectively. Both percentages are still higher than anyone would like to see them. But, as noted here previously, those figures have, up to now, stayed stubbornly high relative to previous economic expansions. Could late June’s shamnesty-bill failure in the Senate have influenced this by making employers less likely to hire illegals, forcing them to find relatively unskilled citizens to do the work instead?

Media Commentary:

The clearly pre-drafted text starting at the middle of Paragraph 6 in this Associated Press report (time-stamped 8:58 a.m.; go here for actual text if the AP report gets updated or moved) shows that AP was ready with the “poor Bush economy poll numbers; fears of out-of-control inflation; sour housing market; stocks cratered last week” mantras even before the numbers came out. Also note the contrast in the words used to describe modest employment decreases and pretty strong increases in this paragraph:

Construction companies slashed 12,000 jobs in July. Manufacturers shed 2,000 and retailers cut a thousand. Some 28,000 government jobs were eliminated. In contrast, education and health care added 39,000. Leisure and hospitality expanded employment by 22,000. Professional and business services added 26,000 new positions.

So AP describes modest decreases in employment caused by evil private-sector employers using violent terminology, while much larger private-sector increases get relatively bland verbiage. Meanwhile, the description of the larger government job reductions slips into passive voice with no perpetrator identified. How obviously biased is that? And exactly how does AP know that the government jobs “were eliminated,” anyway? Couldn’t at least some of the government job reductions relate to departing employees whose replacements haven’t been hired yet?

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UPDATE, 10:15 a.m.: So much for the theory above — The ISM Non-Manufacturing Report came in at 55.8%, which, though still solidly in expansion mode (any reading above 50% represents expansion), is almost 5 points below June’s 60.7%, and way below expectations of 59.0%. The consecutive-month streak for non-manufacturing expansion is now 52.

Nevertheless, proportionally mixing in July’s manufacturing figure of 53.8% with non-manufacturing’s 55.8%, the overall economy is at 55.5% (about 13% of the economy is manufacturing). That’s not as strong as desired, but surely is not, as ridiculously described here, “limping along” or “tepid.”