| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Nonfarm Payrolls - M/M | 180,000 | 70,000 to 215,000 | 114,000 | 206,000 | 179,000 |
| Unemployment Rate | 4.1% | 4.0% to 4.1% | 4.3% | 4.1% | |
| Private Payrolls - M/M | 155,000 | 130,000 to 175,000 | 97,000 | 136,000 | 136,000 |
| Manufacturing Payrolls - M/M | -2,000 | -3,000 to -10,000 | 1,000 | -8,000 | -9,000 |
| Participation Rate | 62.6% | 62.5% to 62.7% | 62.7% | 62.6% | |
| Average Hourly Earnings - M/M | 0.3% | 0.2% to 0.3% | 0.2% | 0.3% | |
| Average Hourly Earnings - Y/Y | 3.6% | 3.9% | 3.8% | ||
| Average Workweek | 34.3hrs | 34.3hrs to 34.3hrs | 34.2hrs | 34.3hrs |
Highlights
Nonfarm payrolls are up 114,000 in July with a net downward revision of 29,000 in the prior two months. The July level was well below the consensus of up 180,000 in the Econoday survey of forecasters. Private payrolls are up 97,000 in July and government jobs are up 17,000.
The goods-producing sector gains 25,000 new jobs in July with an increase of 25,000 in construction and where a 1,000 decline in mining was offset by a 1,000 increase in manufacturing. Private service-providers' payrolls are up 72,000 in July. Most industries had small gains and losses that were broadly even outside of a 64,000 rise for health care and social assistance. The increase in government jobs was mainly due to an increase of 26,200 in local government education that was partially offset by a 16,600 decline in local government excluding education.
Average hourly earnings are up 0.2 percent in July from June and up 3.6 percent year-over-year. The annual increase is the lowest since up 2.3 percent in May 2021. The softening in the pace of increase in hourly earnings is in part because the competitive pressures for some industries have eased considerably. For example, retail hourly earnings are down 0.1 percent in July from June and up 2.0 percent year-over-year. Elsewhere wage pressures remain more elevated such as construction where the month-over-month increase is 0.4 percent and year-over-year is up 4.3 percent.
The unemployment rate rises to 4.3 percent in July after 4.1 percent in June. The consensus in the Econoday survey is 4.1 percent. The July U-6 unemployment rate is up to 7.8 percent after 7.4 percent in the prior month. The increase reflects a rise in the labor force of 420,000 to 168.429 million with the number of employed up 67,000 to 161.266 million and the number of unemployed up 352,000 to 7.163 million.
The number of job losers is up 314,000 to 3.490 in July, job leavers are up 103,000, and new entrants are down 58,000. The labor force participation rate is up to 62.7 percent in July, back to where it was in March and April.
The data in the monthly employment report is a downside surprise in terms of payroll gains and a rising unemployment rate. However, it is also one that points to a labor market that has normalized and is in line with a restored balance of labor supply and demand. The numbers are softer than expected but not exceptionally so. This report is likely to put the seal on expectations that the FOMC will cut rates at the September 17-18 meeting. Since it is only one month's data, it will not force the FOMC's hand to cut sooner.
The goods-producing sector gains 25,000 new jobs in July with an increase of 25,000 in construction and where a 1,000 decline in mining was offset by a 1,000 increase in manufacturing. Private service-providers' payrolls are up 72,000 in July. Most industries had small gains and losses that were broadly even outside of a 64,000 rise for health care and social assistance. The increase in government jobs was mainly due to an increase of 26,200 in local government education that was partially offset by a 16,600 decline in local government excluding education.
Average hourly earnings are up 0.2 percent in July from June and up 3.6 percent year-over-year. The annual increase is the lowest since up 2.3 percent in May 2021. The softening in the pace of increase in hourly earnings is in part because the competitive pressures for some industries have eased considerably. For example, retail hourly earnings are down 0.1 percent in July from June and up 2.0 percent year-over-year. Elsewhere wage pressures remain more elevated such as construction where the month-over-month increase is 0.4 percent and year-over-year is up 4.3 percent.
The unemployment rate rises to 4.3 percent in July after 4.1 percent in June. The consensus in the Econoday survey is 4.1 percent. The July U-6 unemployment rate is up to 7.8 percent after 7.4 percent in the prior month. The increase reflects a rise in the labor force of 420,000 to 168.429 million with the number of employed up 67,000 to 161.266 million and the number of unemployed up 352,000 to 7.163 million.
The number of job losers is up 314,000 to 3.490 in July, job leavers are up 103,000, and new entrants are down 58,000. The labor force participation rate is up to 62.7 percent in July, back to where it was in March and April.
The data in the monthly employment report is a downside surprise in terms of payroll gains and a rising unemployment rate. However, it is also one that points to a labor market that has normalized and is in line with a restored balance of labor supply and demand. The numbers are softer than expected but not exceptionally so. This report is likely to put the seal on expectations that the FOMC will cut rates at the September 17-18 meeting. Since it is only one month's data, it will not force the FOMC's hand to cut sooner.
Market Consensus Before Announcement
A 180,000 rise is the call for nonfarm payroll growth in July versus 206,000 in a June report that included sharp downward revisions to prior months. Average hourly earnings in July are expected to rise 0.3 percent on the month to match June's rise. July's unemployment rate is expected to hold unchanged at June's 4.1 percent which was up from May's 4.0 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.
