Hmmm, is the labor market cracking or is it not? Given the low response rates on the two surveys which underlie these employment reports from the Bureau of Labor Statistics, who really knows. Other evidence had suggested that possibly the creation of jobs and hiring had slowed and today’s release of the first estimate of July job growth adds to that evidence. Supposedly 73,000 jobs were added according to the business survey, a pretty significant underperformance versus most estimates. And the previous two months saw significant downward revisions, which is back to the Biden-era practice. May was revised downward by 125,000 jobs and June by 133,000 jobs, leaving net job growth for those two month at a paltry 33,000. If July experiences a similar revision, it would show a job loss. The household survey did show a job loss–260,000 and the unemployment rate, calculated from that survey, ticked up by a tenth of a percent as well. The labor force participation rate declined. Full time jobs decreased, part-time ones rose. None of this suggests a strong employment situation. On the positive side, hourly earnings showed good growth. Health care and social services employment rose, while federal employment continued to decrease.
I suspect trade uncertainty and consumer exhaustion explain much of the shortfall in job growth. The economy has been running on a debt-fueled spending binge for a long time and at some point that has to run out. The other big factor is the stoppage of illegal immigration and voluntary and involuntary deportation. The number of native born workers rose and the number of foreign born ones decreased. The rise in native-born workers suggests to me that in fact illegal immigration was displacing work for Americans, probably because it is much cheaper to pay people here illegally. Interest rates dropped on US debt, in anticipation that these weak employment numbers will prompt faster and more rate cuts. The stock market, always looking for a reason to buy, probably sees those lower interest rates as a positive. I also believe the warning to Trump is to end the chaos, get all the trade stuff resolved and focus on providing certainty to businesses so they can invest and hire for the future. (BLS Release)
