A Mediocre Jobs Report

by Bob Stein

Despite a welcome drop in the unemployment rate to 9.5 percent, today’s report on the labor market was mediocre, supporting neither the case for a double-dip recession nor the case for a robust recovery. Including positive revisions to prior months, total payrolls came in better than consensus expectations and private payrolls were in line with expectations.

However, total hours worked in the private sector declined 0.2 percent after last month’s increase of 0.3 percent. A 0.2 percent drop in total hours in June is like losing 235,000 jobs in the private sector. Given recent volatility, the best thing to do is average the past two months, which shows enough demand for labor by private companies to boost payrolls by 60,000 per month (assuming firms keep hours per worker unchanged).

Not coincidentally, private payrolls are up 58,000 per month in the past two months. So far this year, private payrolls are up 100,000 per month while civilian employment — minus the government sector — is up 210,000 per month. Meanwhile, productivity growth remains very strong. As a result, the economy can grow at close to a 4 percent annual rate for 2010 despite a subdued willingness to hire that likely has roots in the expansion of the size of government and the looming new health-care entitlement that starts in 2013. 

In other recent news, cars and light trucks (SUVs and pick-ups) were sold at an 11.1 million annual rate in June versus a consensus expected 11.4 million rate and 11.6 million rate in May. Still, auto sales were up 14 percent versus June 2009.

— Bob Stein is senior economist with First Trust Advisers.

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