As per the earlier preview, there were virtually no potential downsides to today’s jobs report (with a possible adverse exception of tariffs), and as so often happens, moments ago the BLS reported that July payrolls missed “bigly”, rising just 157K, missing expectations of 193K, and the lowest monthly print since March. The 157K July jobs is well below the average monthly gain of 203,000 over the prior 12 months.
This was the biggest miss to expectations since October.
There is one potential culprit for the miss: the bankruptcy of Toys’R’Us: as SouthBay Research notes, jobs lost from the bankrupt retailer dragged payrolls lower by 31k.
Offsetting the poor July print was the sharp upward revision to the June number which rose from 202K to 234K. The change in total nonfarm payroll employment for May was revised up from +244,000 to +268,000, and the change for June was revised up from +213,000 to +248,000. With these revisions, employment gains in May and June combined were 59,000 more than previously reported.
The unemployment rate dipped from last month’s 4.0%, to print where consensus expected it would, at 3.9%
One reason why the market will likely ignore the poor print, however, is that average hourly earnings rose 0.3% in July, in line with expectations, while on an annual basis hourly earnings rose 2.7%, the same as June and also in line with the expected.
Another potentially troubling number is that the average workweek for all employees on private nonfarm payrolls decreased by 0.1 hour to 34.5 hours in July, following an increase of 0.1 hour in June. However, the average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours.
Digging into the numbers, there was distinct strength in energy jobs, with oil and gas extraction payrolls rose 7,500 from a year earlier. Gasoline stations payrolls rose 100 in July after rising 500 in June. Pipeline transport payrolls fell 200 in July after rising 300 in June. Petroleum and coal payrolls rose 800 in July after rising 200 in June
Bloomberg notes that while 12K employees said they could not work due to bad weather, the historical average for July is 31k employees; Meanwhile, another 104k workers who usually work full-time could only work part-time due to the weather last month.
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Breaking down the job additions:
- Employment in professional and business services increased by 51,000 in July and has risen by 518,000 over the year. Over the month, employment edged up in temporary help services (+28,000) and in computer systems design and related services (+8,000).
- Manufacturing added 37,000 jobs in July, with most of the gain in the durable goods component. Employment rose in transportation equipment (+13,000), machinery (+6,000), and electronic instruments (+2,000). Over the past 12 months, manufacturing has added 327,000 jobs.
- In July, employment in health care and social assistance rose by 34,000. Health care employment continued to trend up over the month (+17,000) and has increased by 286,000 over the year. Hospitals added 7,000 jobs over the month. Within social assistance, individual and family services added 16,000 jobs in July and 77,000 jobs over the year.
- Employment in food services and drinking places continued to trend up over the month (+26,000). Over the year, the industry has added 203,000 jobs.
- Construction employment continued to trend up in July (+19,000) and has increased by 308,000 over the year.
- In July, employment in retail trade changed little (+7,000). Job gains occurred in general merchandise stores (+14,000), clothing and clothing accessories stores (+10,000), and food and beverage stores (+8,000). These employment gains were offset by a decline of 32,000 in sporting goods, hobby, book, and music stores, reflecting job losses in hobby, toy, and game stores.
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Author: Tyler Durden