| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Nonfarm Payrolls - M/M | 200,000 | 150,000 to 300,000 | 187,000 | 209,000 | 185,000 |
| Unemployment Rate | 3.6% | 3.5% to 3.6% | 3.5% | 3.6% | |
| Private Payrolls - M/M | 175,000 | 140,000 to 225,000 | 172,000 | 149,000 | 128,000 |
| Manufacturing Payrolls - M/M | 5,000 | 0 to 10,000 | -2,000 | 7,000 | 6,000 |
| Participation Rate | 62.6% | 62.6% to 62.6% | 62.6% | 62.6% | |
| Average Hourly Earnings - M/M | 0.3% | 0.3% to 0.4% | 0.4% | 0.4% | |
| Average Hourly Earnings - Y/Y | 4.2% | 3.5% to 4.2% | 4.4% | 4.4% | |
| Average Workweek | 34.4hrs | 34.3hrs to 34.4hrs | 34.3hrs | 34.4hrs |
Highlights
Nonfarm payrolls are up 187,000 in July, somewhat below the consensus of 200,000 in the Econoday survey of forecasters. The level is not materially different from market expectations, but the net downward revision of 49,000 in the prior two months indicates that payroll growth has decelerated since the first quarter. The monthly average for the first quarter 2023 is up 312,000 and the second quarter average is up 228,000. Private payrolls are up 172,000 in July and government up 15,000.
Goods-producers payrolls are up 18,000 in July, mainly due to a 19,000 increase in construction, while mining is up only 1,000 and manufacturing down 2,000. Despite the downturn in the housing market with the increase in mortgage rates, limited supplies of homes are driving new construction and home renovation and repair.
Private service-providers payrolls are up 154,000 in July on a mixed performance across sectors. The largest increase is in education and health services at up 100,000, or about 2/3 of the overall rise in the service sector. Among education and health services, the big increase is 63,000 in healthcare.
If hiring is slowing, wage increases are not. Average hourly earnings are up 0.4 percent in July from June, and up 4.4 percent year-over-year. These rates are both higher than expected and match June's report. Wages are not rising as quickly as they were earlier in the year, but are still solid.
Also, if hiring is decelerating, the labor market remains tight. The unemployment rate is down a tenth to 3.5 percent in July, and the U-6 unemployment rate is down 2 tenths to 6.7 percent in July. The labor market is absorbing both new entrants and the currently unemployed. The participation rate remains at 62.6 percent for the fifth straight month.
Some part-time workers seem to be shifting over to full-time employment. The number of persons working part-time for economic reasons is down 191,000 to 4.000 million in July. Job losers are down 280,000 to 2.620 million, and job leavers are up 58,000 to 852,000. There are 55,000 fewer new entrants to the labor market in July at 503,000. On net, the labor force is up 152,000 to 167.103 million with 263,000 more employed persons and 116,000 fewer unemployed.
The imbalance in the supply of labor is improving but not enough that Fed policymakers would characterized it as anything but tight.
This mixed report leaves Econoday's Consensus Divergence Index at minus 5 both overall and also when excluding price data. This level is close to the zero line to indicate that recent US economic data, on net, are coming in close to expectations.
Goods-producers payrolls are up 18,000 in July, mainly due to a 19,000 increase in construction, while mining is up only 1,000 and manufacturing down 2,000. Despite the downturn in the housing market with the increase in mortgage rates, limited supplies of homes are driving new construction and home renovation and repair.
Private service-providers payrolls are up 154,000 in July on a mixed performance across sectors. The largest increase is in education and health services at up 100,000, or about 2/3 of the overall rise in the service sector. Among education and health services, the big increase is 63,000 in healthcare.
If hiring is slowing, wage increases are not. Average hourly earnings are up 0.4 percent in July from June, and up 4.4 percent year-over-year. These rates are both higher than expected and match June's report. Wages are not rising as quickly as they were earlier in the year, but are still solid.
Also, if hiring is decelerating, the labor market remains tight. The unemployment rate is down a tenth to 3.5 percent in July, and the U-6 unemployment rate is down 2 tenths to 6.7 percent in July. The labor market is absorbing both new entrants and the currently unemployed. The participation rate remains at 62.6 percent for the fifth straight month.
Some part-time workers seem to be shifting over to full-time employment. The number of persons working part-time for economic reasons is down 191,000 to 4.000 million in July. Job losers are down 280,000 to 2.620 million, and job leavers are up 58,000 to 852,000. There are 55,000 fewer new entrants to the labor market in July at 503,000. On net, the labor force is up 152,000 to 167.103 million with 263,000 more employed persons and 116,000 fewer unemployed.
The imbalance in the supply of labor is improving but not enough that Fed policymakers would characterized it as anything but tight.
This mixed report leaves Econoday's Consensus Divergence Index at minus 5 both overall and also when excluding price data. This level is close to the zero line to indicate that recent US economic data, on net, are coming in close to expectations.
Market Consensus Before Announcement
A 200,000 rise is the call for nonfarm payroll growth in July versus 209,000 in June which was very near expectations. Average hourly earnings in July are expected to rise 0.3 percent on the month for a year-over-year rate of 4.2 percent; these would compare with 0.4 and 4.4 percent for the last three reports. July's unemployment rate is expected to hold unchanged at 3.6 percent.
Definition
The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Description
If ever there was an economic report that can move the markets, this is it! The anticipation on Wall Street each month is palpable, the reactions can be dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
