MST Econ-Blog: Job Growth Continues, Outdistances Expectations

Guest blog by Tom Cunningham, PhD., Economist

Altanta – August 5, 2016 . . . Like many of the issues politicians are arguing over, the economy is providing cause for encouragement and room for complaint. July’s employment report was very good, better than expected. The U.S. economy added 255,000 jobs, which outdistanced expectations of around 180,000. And the two previous months’ reports were revised upward slightly.  Banking was one of the beneficiaries. Construction and manufacturing were expected to show losses but came in essentially flat. In fact, the only sector to show a serious decline was mining, where employment fell by another 9,000; mining has been steadily losing jobs for a couple of years.

In the Household Survey, the headline unemployment rate (U3) was unchanged at 4.9 percent, and the broader measure of labor underutilization (U6) ticked up a tenth to 9.7 percent. In terms of other watched rates, wages increased by 0.3 percent and job participation came in at 62.9 percent, neither of which signals a move of any significance.

Consumers continue to show determination. The first release of Q2 GDP wasn’t up to expectations in terms of the overall number, but the consumption component was solid. So we should look for a good Q3, and perhaps, upward revisions to the Q2 number.

Outside the U.S., the negative fallout from Brexit continues, which was reflected in the decision by the Bank of England to cut its target interest rate to 0.25 percent, the lowest since its founding in 1694. Of course, over the centuries financial markets have changed dramatically, so you can’t compare the rates apples-to-apples. It’s still too early to see any serious macro results from Brexit for the United Kingdom, but things like purchasing managers’ indices, business confidence surveys, business location preference surveys all show notable declines. 

Overall the July report is good if not wildly exciting. It certainly doesn’t resolve any issues related to the fundamental overall strength of our economy, and as such, allows the politicians on both sides to rant on.

Tom Cunningham holds a Ph.D. in economics from Columbia University and was senior economist with the Federal Reserve Bank of Atlanta from 1985 to 2015. Mr. Cunningham serves as a consultant to MST in the creation and ongoing development of the MST Virtual Economist.

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