Without Job Growth, Here Comes the “QE2”
Posted by Larry Doyle on August 6, 2010 9:46 AM |
This morning’s Unemployment Report further confirms that our economy remains burdened by our Sense on Cents description of ‘walking pneumonia.’ While this month’s report was decidedly weaker than expectations, once again we witness downward revisions to prior reports. Do you find it strange that more often than not much of the economic data released has displayed this tendency to have downward revisions to prior reports. Think the data is heavily massaged? You think?
Let’s navigate this morning’s report thanks to The Wall Street Journal’s Market Data page:
The July jobs report disappointed and weakness was largely in the government sector – and it was not all just temporary Census workers being laid off. But there were a few bright spots, including gains in wages, the workweek, and earnings. Overall payroll jobs in July declined 131,000 after falling a revised 221,000 in June and after a 432,000 boost in May. The decline in July was worse than the market forecast for a 125,000 decline. The May and June revisions were net down 97,000.
Turning to the household survey, the unemployment rate was unchanged at 9.5 percent in July.
For detail in the payroll numbers, the big weakness in July came from a 202,000 drop in government jobs, following a 252,000 fall the month before. Of the July government plunge, 143,000 came from a drop in Census Bureau payrolls.
Private nonfarm employment, which discounts the effects of hiring and firing temporary Census workers, accelerated moderately to a 71,000 increase, following a 31,000 gain in June. The latest number came in below the consensus expectation for a 100,000 boost in private payrolls. Improvement was evenly divided between the goods-producing and services-providing sectors. Good-producing rose 33,000 with manufacturing up 36,000, mining up 7,000, and construction down 11,000. Services-providing jobs rose 38,000 with strength led by health care, up 27, 000, and transportation & warehousing, up 12,000.
There were some notable positives in the latest employment report. Average hourly earnings improved to up 0.2 percent, following no change in June and matching the market projection for a 0.2 percent gain. The average workweek for all workers rose to 34.2 hours from 34.1 hours in June. Analysts had called for 34.1 hours.
What does it all mean? Our economy is continuing to adjust to the structural changes inhibiting real job growth. These changes are part and parcel of the ongoing deleveraging occurring in almost every corner of our economic landscape. What should we expect from Washington? With little political will to pass another round of economic stimulus, Barack and friends will look for Uncle Ben Bernanke over at the Federal Reserve to take us for a cruise on the QE2. What’s that? Look for the Fed to launch another round of quantitative easing. In the process, our greenback will be under pressure, our interest rates will remain low, and equities and other credit sensitive sectors will likely continue to gain support from the dollar carry trade. All aboard the QE2 for another ride.