Economy Creates New Jobs!

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Economy Creates 163,000 New Jobs but Rate Rises to 8.3%

Published: Friday, 3 Aug 2012 | 8:49 AM ET

The U.S. economy followed up a weak second quarter by creating more jobs than expected with 163,000 new positions added in July, but the unemployment rate rose to 8.3 percent.

Markets reacted positively to the announcement, with the stock market surging at the open and safe-haven bond prices plunging. Economists had been expecting 100,000 new jobs.As the country struggles to gain growth traction, the unemployment rate held above 8 percent for the 41st consecutive month, according to the latest report from the

"I'd call this a soft 163," said Steve Blitz, chief economist at investment research firm ITG in New York. "If you want to take from this the notion that the economy is not heading to a recession or something more ominous, that's fine. But if you want to take from this the idea that the economy is about to accelerate, I think that would be a big mistake."

Despite the seemingly good news, the report's household survey showed that the actual amount of Americans working dropped by 195,000, with the net job gain resulting primarily from seasonal adjustments in the establishment survey. The birth-death model, which approximates net job growth from newly added or closed businesses, added 52,000 to the total.

The household survey also showed 150,000 fewer Americans in the workforce.

In all, the government said private payrolls added 172,000 positions — about in line with Wednesday's report from ADP and Macroeconomic Advisors — while government subtracted 9,000.

"While the monthly gain is still relatively small by historical standards, it might help spark somewhat higher consumer optimism and spending," Kathy Bostjancic, director of macroeconomic analysis at The Conference Board, said in response to the report.

At this point, all economic reports and particularly the jobless number are viewed through the prism of how they might affect Federal Reserve action.

The Fed this week offered little direction other than to affirm that it stood at the ready to provide more quantitative easing stimulus if needed. But Chairman Ben Bernanke may add more to the conversation during the annual summit in Jackson Hole, Wyo., later this month, and the central bank's policy committee meets again in September.

"If the Fed is sitting there wondering what to do, this doesn't tell them they don't have to do anything," Blitz said. "If anything, the numbers are going to get weaker than the 163 next month."

At least part of the positive market reaction, then, probably could be attributed to anticipation of more Fed intervention.

"The bottom line is that the employment report shows a strong headline reading but as we believe that most people, and importantly the (Fed), will resort to digging beneath the headlines to focus on the enormous uphill struggle facing the labor market," said Andrew Wilkinson, chief economist strategist at Miller Tabak in New York.

"The report should do little to change expectations for a further move in September from the Fed and so one can understand why equities are happy to advance," he added.

Professional and business services led the job gains with 49,000 new positions, while the hospitality industry added 29,000 and manufacturing grew by 25,000.

The average work week held steady at 34.5 hours while average hourly earnings rose 2 cents to $23.52.

June's anemic 80,000 gain was revised down to just 64,000.

The first quarter of the year saw an average of 225,000 new positions a month, a figure that has dropped off considerably in the second quarter and helped fuel the political debate over which candidate — President Obama or Republican Mitt Romney — is better suited to bring the economy out of its malaise.

The Obama administration put the onus on Washington lawmakers, with whom the White House has been doing battle over the best prescription for job growth.

"We know that there is an availability for us to move ahead if we can get cooperation from the Congress," Labor Secretary Hilda Solis told CNBC's "Squawk on the Street."

While the figures themselves have been gloomy enough, there is considerable debate over whether the Labor Department's headline numbers present the true picture.

A measure that takes into account those who have stopped looking for jobs as well as those working part-time for economic reasons has hovered near 15 percent. The so-called "real" unemployment rate, or U-6 measure, is above 20 percent in Nevada and California.

On a national level, that more encompassing rate edged higher to 15.0 percent.

Unemployment for blacks fell from 14.4 percent to 14.1 percent, while the rate for Latinos slid from 11 percent to 10.3 percent. The unemployment rate for teenagers edged higher to 23.8 percent. (How's that hope and change working out for you?)

http://www.cnbc.com/id/48480887

Seasonal And Birth Death Adjustments Add 429,000 Statistical "Jobs"

Happy by the headline establishment survey print of 133,245 which says that the US "added" 163,000 jobs in July from 133,082 last month? Consider this: the number was based on a non seasonally adjusted July number of 132,868. This was a 1.248 million drop from the June print. So how did the smoothing work out to make a real plunge into an "adjusted" rise? Simple: the BLS "added" 377K jobs for seasonal purposes. This was the largest seasonal addition in the past decade for a July NFP print in the past decade, possibly ever, as the first chart below shows. But wait, there's more: the Birth Death adjustment, which adds to the NSA Print to get to the final number, was +52k. How does this compare to July 2011? It is about 1000% higher: the last B/D adjustment was a tiny +5K! In other words, of the 163,000 jobs "added", 429,000 was based on purely statistical fudging. Doesn't matter - the flashing red headline is good enough for the algos.

Seasonal Adjustment:

http://www.zerohedge.com/news/seasonal-and-birth-death-adjustments-add-429000-statistical-jobs

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Once again, the damning graph comparing Obama’s stimulus promises with actual results. “Not only is the 8.3% unemployment rate way above the 5.6% unemployment rate that Team Obama predicted for July 2012 if Congress passed the $800 billion stimulus plan. It’s way above the 6.0% unemployment rate they predicted if no stimulus was passed.”

July jobs report: America’s labor market depression continues

James Pethokoukis | August 3, 2012, 9:08 am

Only in a world of lowered, New Normal expectations was the July jobs report anything less than another disaster for U.S. workers. Nonfarm payrolls rose 163,000 last month as the unemployment rate rose to 8.3%. In addition, employment for May and June was revised by 6,000 jobs.

– Not only is the 8.3% unemployment rate way above the 5.6% unemployment rate that Team Obama predicted for July 2012 if Congress passed the $800 billion stimulus plan. It’s way above the 6.0% unemployment rate they predicted if no stimulus was passed.

– Job growth, as measured by nonfarm payrolls, has average about 75,000 jobs a month during the Obama recovery for a total of 2.7 million jobs. Context: During the first three years of the Reagan Recovery, job growth averaged 273,000 a month for a total of 9.8 million. If you adjust for the larger U.S. population today, the Reagan Recovery averaged 360,000 jobs a month for a three-year total of 13 million jobs.

– This continues to be the longest stretch of 8% or higher unemployment since the Great Depression, 42 straight months.

– If the labor force participation rate was the same as when Obama took office in January 2009, the unemployment rate would be 11.0%.

– Even if you take into account that the LFP should be declining as America ages, the unemployment rate would be 10.6%.

– If labor force participation rate hadn’t declined since just last month, unemployment rate would have risen to 8.4%.

– The broader U-6 unemployment rate, which includes “all persons marginally attached to the labor force, plus total employed part time for economic reasons,” ticked up to 15.0%.

– Two years ago, Treasury Secretary Tim Geithner wrote his now-infamous “Welcome to the Recovery” op-ed for the New York Times. During those two years, the economy has added an average of just 137,000 jobs a month.

– Not only is the 8.3% unemployment rate way above the 5.6% unemployment rate that Team Obama predicted for July 2012 if Congress passed the $800 billion stimulus plan. It’s way above the 6.0% unemployment rate they predicted if no stimulus was passed.

– Good point on the report from IHS Global Insight:

In the household survey, which produces the unemployment rate, both the employment-to-population ratio and the labor force participation rate dropped,

not signs of a healthy labor market. T

he report will alleviate fears that the US might be tipping back into recession. But uncertainties over the strength of global growth, the Eurozone crisis, the fiscal cliff and the November elections are giving plenty of reasons for caution. We expect subdued monthly job creation in the 100,000-150,000 region in the second half of the year

– And Citgroup’s take:

To keep us all guessing, today’s data included a particularly weak reading on employment from the household survey, which showed a 195,000 drop in employment and 150,000 drop in the labor force.

The unemployment rate rose to 8.3% from 8.2%. While trend employment gains are not progressing at a particularly robust rate, we would not view a 0.1 percentage point move in a singlemonth reading as particularly significant.

Also showing that the underlying trend is not very robust, the work week was unchanged and average hourly earnings rose just 0.1%, suggesting a much smaller gain in real income than reported in June (which also argues for smoothing).

Aggregate hours worked rose a modest 0.1%.

http://www.aei-ideas.org/2012/08/july-jobs-report-americas-labor-market-depression-continues/

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Train wreck.

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Train wreck.

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