While the headline numbers on the US jobs report missed market expectations, the details of the report told a better story and are unlikely to change the Federal Reserve’s monetary policy plans for the year.
Here are economists’ key takeaways from the jobs report.
Ian Shepherdson, economist at Pantheon Macroeconomics, said the report was “better than it looks". He put the slowing headline numbers down in part to seasonal adjustment around the academic year and said the numbers are unlikely to change the Fed’s plans unless data in the future takes “a serious turn for the worse”. He said:
Moreover, much of the swing between June and July appears to be due to seasonal adjustment problems around the end of the academic year; private sector education jobs fell 11K in July after rising 32K in June, and state/local government education jobs fell 10K after rising 12K. The total education swing between the two month, therefore, was -65K, the biggest part, by far, of the 91K downshift in headline payroll growth between June and July. Most of the rest was in the transportation and finance/insurance sectors; elsewhere, manufacturing and construction gains were solid.
Paul Ashworth, economist at Capital Economics, noted that upward revisions to prior months softened the blow as employment growth slowed. He said:
Non-farm payrolls increased by a more modest 157,000 in July but, with the gain in the preceding two months revised up by a cumulative 60,000, the labour market still appears to be in good health. This won’t derail the Fed’s plans to hike interest rates again next month.
Eric Winograd, economist at AB, said the jobs report was “uneventful” and added that the labour market remains “strong”.
The back and forth in the unemployment rate the last couple of months (from 3.8% to 4.0% to 3.9%) has been driven in large part by fluctuations in the participation rate . . . and we should more or less ignore those fluctuations. The clear trend there is sideways and unless/until that changes it’s noise rather than signal.
. . . The strength in hiring is feeding through to wages . . . but only to a limited degree. Wages are up 2.7% YoY, which leaves them well below the peak of past cycles but well above the trough of this cycle. Anecdotal reports suggest that employers are eager to hire people but still reluctant to boost compensation in a way that shifts wage growth meaningfully higher.
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