Friday brought a shock to the US labor markets latest snapshot. A quarter of a century a month job cuts comes as a stinging and surprise shock to job markets, catching those looking for news and markets waiting for economic guidance off guard. The numbers delivered a surprise to economists who predicted a robust total of 80,000 to 95,000 additional jobs. Job numbers for May and June also took a tumble of 103,000 jobs combined. The report was even more startling in that the unemployment rate also fell to 4.1 percent at the same time.
It appears to be good news that the rate has fallen but it was actually caused by large numbers of people leaving the labor force which resulted in a significant decline in the labor force participation rate to 61.4 percent, the lowest in over 5 years. Essentially this means that in reality more Americans were neither working nor looking for work which, while it makes the unemployed figure look better, is not good news in itself.
Local government education was a significant contributor, experiencing the largest decline at about 50,000 jobs, which is seen as partly seasonal adjustment anomalies. The retail trade also contracted for the second straight months, losing 19,000 due to both warehouse clubs and supercenters and fuel stations. The leisure and hospitality sector is still getting back to normal following the World Cup, losing about 40,000 jobs, while financial activities continued to decline for the third straight months at another 14,000.
Healthcare was a pleasant surprise during this falloff, adding 22,000 jobs, and construction gained as well. Manufacturing also grew Quite a bit, providing the most consistent part of the report. The figures come at a sensitive time for policymakers and households. Inflation has stuck in recent months, partly because of high energy prices related to continuing unrest in the Persian Gulf. Officials at the Federal Reserve had become more explicit about the likelihood of hiking rates as soon as September if inflation did not recede. Friday’s softer-than-expected jobs data instantly took the wind out of those sails.
Futures markets lowered the probabilities of a hike in September, and stock futures reacted to the announcement by gaining in early trade in anticipation of an more restrained central bank. For average workers, the report has a more visceral significance. Anyone who has been observing the dwindling job growth in large chunks of the service sectorretailers restaurants local government employeesalready feels that we’ve entered the eye of a non-violent storm. Firms feel increasingly discriminatingthe boom in new technologies has added an additional layer of instability around anticipated workplace processes and competenciesand yet the health-care and construction industries both reveal a surprising staying power. After three months of robust gains, the moving three-month average of jobs gained has all but slowed to a crawl and is equivocally approaching the level most economists believe to be necessary just to keep pace with population growth.
