Just a quick read on today’s employment data from my vacation.
June Nonfarm Payrolls, well let’s just say it, sucked. The economy only added 18,000 jobs. The private sector added 57,000 jobs, but the government cut 39,000 jobs. Temporary employment declined by 12,000. This is important because temporary employment data are often good indicators for future hiring trends. Job data was revised lower for May and April. The unemployment rate rose to 9.2%, the highest since last December. Today’s print of 18,000 new jobs is the poorest showing since last September.
If there is anything positive one can take away from this dismal number it is that recent ISM and ADP data indicated that the employment picture may not be quite so dismal. However, even those respective reports indicate that job growth is poor.
It comes down to fundamentals. The only ways we can get employment beyond the 200,000 jobs per month needed to bring down the unemployment rate is to either generate more consumer spending (not likely as consumers cannot and will not borrow to spend) or make U.S. labor more price competitive with external labor sources. This can be done with wage and benefits cuts, a weaker U.S. dollar or both. This is the new normal for at least the next few years.
Yields of U.S. treasuries and interest rates should remain low for an extended period of time.
1 comment:
If your conclusions about the fundamentals are correct, we're stuck. In the age of entitlements, far too many will opt for staying home and collecting UI as opposed to taking a pay cut (as if the former is lesser of two evils). And benefit cuts will fuel the calls for more government healthcare, which will depress the jobs market even more. And a weaker dollar will mean higher fuel pricing, particularly when we seem content not to expand our own drilling.
Sad, strange days, indeed.
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