On Friday, the U.S. Bureau of Labor Statistics (BLS) showed a better than expected increase in employment. Nonfarm jobs rose by 117,000 in July and the unemployment rate fell by 10 bps to 9.1%. The BLS also upped the estimates for May and April by 112% (!) to 53,000 and by 156% (!!) to 46,000, respectively.
However, beyond the headlines, the report was negative from numerous angles. The broader U6 unemployment rate edged down by 10 bps from a six-month high to 16.1%; on the other hand, more workers dropped out of the work force. In fact, the labor force participation rate fell to the lowest low, 63.9%, since the double-dip recession, May 1983. Had this rate reverted to the long-run (non-recession) mean of 66.04%, then rather than falling 10 bps to 9.1%, the unemployment rate in July would have increased by 10 bps to 12%.
The number of long-term unemployed (>= 27 weeks) held above 6 million for a third straight month and the employment-to-population ratio, 58.1%, fell to the lowest point since the double-dip recession, July 1983.
The average workweek for all employees in the private sector was unchanged at 34.3 hours. The factory workweek and overtime also were unchanged in July, as illustrated in today’s issue of .
Finally, the average hourly earnings for all employees increased by 10 cents, or 0.4% to $23.13. Over the past 12 months, average hourly earnings have increased by 2.3%. At the same time, the average price for a gallon of gasoline, retail, has increased by 34%. Consequently, the ratio of retail gasoline as a ratio to hourly income increased in July by 377 bps to 15.8% compared with a year ago.
Bottom line, the modest gain in the headline employment numbers are an aberration. The unemployment rate fell, but it really didn’t and that hardly bodes well for the economic recovery.
Stephen Schork is the Editor of and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.