Job Market Improves Slightly

This morning’s monthly payrolls report came in better than expected, sparking a rally in stocks and driving bond yields higher.  The headline numbers:  payrolls fell by 247,000 in July, far better than the 443,000 jobs lost the prior month.  It was the smallest job loss since August 2008.

A few other points on today’s report:

• The unemployment rate edged down from 9.5% to 9.4%.  The main reason for this is that the number of people who want to work fell faster than the number of available jobs.   The labor force shrank by 422,000 in July.  Why this is the case is unclear.
• Average weekly hours worked rebounded to 33.1 from 33.0, largely due to the automotive industry.  The number of temporary workers fell by 10,000.  Both are encouraging signs, since employers will not hire more workers until the ones they currently have are fully engaged.
• Average hourly earnings increased by three cents to $18.56.  This is a 0.2% gain from the prior month and 2.5% in the last year.  It doesn’t sound like much, but any gain at all is better than a loss.
• Statistical revisions added 43,000 jobs to the May and June payroll reports.

Bottom line:  today’s news is encouraging but hardly cause to celebrate.  If this turns out to be a “jobless” recovery like those of 1991 and 2001, plenty of people will remain in varying degrees of desperation.  The prospect for a “double-dip” recession remains quite real.

Moreover, nothing in the report suggests that consumer spending – which is 70% of the U.S. economy – will rebound in the near future.  Millions are still unemployed and will likely remain so for a long time.