Positive Surprises in Employment Report


August 9, 2009

The headlines for the July employment report brought positive surprises all around.

Nonfarm payrolls declined -247,000 (consensus -325K) while nonfarm payrolls for June (-443K) and May (-303K) were both revised slightly lower from their prior readings. The unemployment rate dipped to 9.4% (consensus 9.6%) from 9.5%, average hourly earnings rose 0.2% (consensus 0.1%), and the average workweek increased to 33.1 hours (consensus 33.0) from 33.0.

These are headlines that should warm the administration in Washington and they will engender confidence in the idea that the worst of the downturn is over. So, too, will the indication that the manufacturing workweek increased 0.3 to 39.8 hours. That is a good portent for an improvement in industrial production, although with overtime hours staying flat, it is clear business isn't booming.

It is easy perhaps to get a sense from the headline figures that the labor market is much improved. It is relative to what we witnessed just a few months ago, but it is still a troubled place.

Payroll losses were reported across nearly every major category, with the exception of small increases in education and health services (+17K), leisure and hospitality (+9K) and government (+7K). Additionally, 1 out of every 6 workers over the age of 16 still lacks full-time employment. The number of discouraged workers was 796,000 in July, up by 335,000 over the past 12 months.

The difficulty in finding a new job is best reflected in the extension of the average duration of unemployment to 25.1 weeks from 24.5 weeks. This is the highest since records began in 1948. More alarmingly perhaps is that 1 out of every 3 unemployed workers has been unemployed for 27 weeks or longer.

The July employment report has some encouraging characteristics, but at the end of the day there were still 247,000 jobs lost in July, bringing the total number of jobs lost since December 2007 to 6.7 million. There isn't a whole lot to cheer about there.