The Labor Department released the July employment report this morning. The headline numbers that economists follow are the monthly increase in nonfarm payrolls and the unemployment rate. Economists were looking for nonfarm payrolls to increase by 85,000 in July. The actual figure was 117,000, and when you add back the 23,000 jobs that were lost in state government due almost entirely to a partial shutdown of the Minnesota government, you have a nonfarm payroll number closer to 140,000. Not bad, but not nearly enough to get this economy moving. Assuming a 140,000 gain in payrolls in July, the three-month moving average is still only 83,000. That isn’t enough jobs to even stabilize the unemployment rate.
Digging deeper into the payroll employment report, there were modest employment gains in most major sectors of the labor market. Importantly, though, temporary employment remained weak. Temporary employment is often a leading indicator of the labor market. In July, temporary employment was basically flat. The number of temporary workers has now fallen in three out of the last four months. The last time temporary employment was this weak, the economy was headed for recession.
While the payroll employment survey was decent and nowhere near the disaster we saw last month, the household employment survey was again soft. At turning points in the economy, the household survey may be more responsive to conditions on the ground. The household survey showed that employment fell in July and was down in three of the last four months. The unemployment rate ticked down a point, but only because 374,000 people dropped out of the labor force. The unemployment rate adjusting for labor-force dropouts was 10.7% in July. The employment-to-population ratio also ticked down in July. As a percentage of the population, fewer Americans are working today than at any time since 1983. Let the good times roll!