August 1, 2008: Unemployment jumped, Payroll slumped

The employment report (July)
Expectations:
- Unemployment rate: 5.6%
- Payroll growth (contraction): -75,000 jobs lost
- Average hourly earnings: +0.3%
- Average workweek: 33.6 hours

Previous (June):
- Unemployment rate: 5.5%
- Payroll growth: -62,000 jobs lost
- Average hourly earnings: +0.3%
- Average workweek: 33.7 hours

Revised (June):
- Payroll growth: -51,000 jobs lost
Today’s release (July):
- Unemployment rate: 5.7%
- Payroll growth: -51,000 jobs lost
- Average hourly earnings: +0.3%
- Average workweek: 33.6 hours

For a multi-opinionated review of the employment report, see the Wall Street Journal’s Real Time Economics Blog.

The report beat expectations, but tells a good-bad story. Total July payroll fell -51,000, but May and June were revised up to indicate fewer job losses. Total jobs lost in 7 months is -463,000; compare that to the 1.6 million jobs lost in the last recession (March 2001 to November 2001), and the labor market contraction is “mild” at the worst. The unemployment rate rose 0.2% to 5.7%, its highest level since March 2004. Average workweek fell to 33.6 hours; its lowest level since November 2004. Firms are lowering hours and that is usually an indication that the next job report (August) will also be weak. The labor market is deteriorating.

Here is the cyclical problem: job loss → lower income → lower spending → lower investment → lower GDP → lower growth, or negative growth → job loss. This self-perpetuating cycle is called a recession.

This week’s data in brief (click on the picture to zoom in):

Please leave a comment. Best, Nontruths