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08 05 2016 | by Victor Xing | Economics

July Payrolls: beyond the shadows of may

July Payrolls

Summary of July NFP:

  • NFP at 255K vs. 180K survey, with prior two months revised up 18K
  • U3 at 4.9% vs. 4.8% consensus, U6 at 9.7% vs. 9.6% prior
  • Part-time worker for economic reasons (involuntary part-time workers) at 3.73% vs. 3.68% prior
  • Aggregate labor force participation rate at 62.8% vs. 62.7% prior, prime age cohort unchanged at 81.2%
  • Long-term unemployed as a percentage of unemployed at 26.6% vs. 25.8% prior
  • Average hourly earnings at 0.31% MoM vs. 0.2% survey; YoY change at 2.64% vs. 2.6% consensus
  • Professional, Scientific and Technical Services led the job gains, Educational Services led the job losses

The latest Payrolls came in at 255,000 vs. 180,000 consensus, and prior two months’ revision was at a healthy 18,000.  The U3 unemployment rate unchanged at 4.9% vs. 4.8% expectations (U6 rose to 9.7% vs. 9.6% prior).

July Payrolls
U3, U6 and involuntary part-time workers

The above-consensus U3 was due to a positive reason: labor force participation rate rose to 62.8% vs. 62.7% prior, and prime age participation rate was unchanged vs. prior at 81.2%

July Payrolls
Headline and prime age labor force participation rate

Average hourly earnings beat expectations at 0.3% MoM (2.6% YoY), which will likely boost FOMC participants’ confidence on diminishing slacks in the (highly polarized) labor market.

July NFP
Average hourly earnings

Unfortunately, a few broader indicators saw signs of deterioration: part-time workers for economic reasons as a percent of labor force rose slightly to 3.73% vs. 3.68%, and long-term (27+ weeks) unemployed as a percent of total unemployed rose again to 26.6% vs. 25.8% prior.

July Payrolls
Long-term unemployed as a percent of total unemployed

Furthermore, it was encouraging to see on-going strength in the Professional, Scientific, and Technical sector.  On the other hand, the 14K decline in Educational Services (school administrators, elementary, middle, and secondary school teachers, as well as teacher assistants) was puzzling.  The BLS official summary did not highlight notable changes in the educational sector, and its divergence from Local Government Education and State Government Education suggest signs of trouble for education-entities under a for-profit model.

Next article08 02 2016 | by Victor Xing | Economics

June PCE: softer readings as durable goods weigh