FRONT PAGE CONTRIBUTOR
Jobs Report Surprises on the Downside
Noted briefly: the BLS report on June employment conditions was sharply disappointing. Non-farm payrolls rose by only 18,000 jobs. This is far below the +200,000 jobs we were seeing monthly earlier this year. It undershot the expectations of private economists, some of whom were expecting at least +50,000. And it varies from the considerably more-optimistic ADP report issued earlier this week.
The June number has been widely anticipated because the May number was such a stinker. If these reports are accurate, it looks like the US economy suddenly slammed on the brakes and stopped creating many jobs, late this past spring. Many people believed that the May number was an outlier, and the June number would correct it on the upside.
Instead, the June report looks like a repeat of May. Nearly every sector is continuing trend. Mining, leisure/hospitality, and business services all created jobs, but not in excess of earlier trends. Manufacturing, which had been strong earlier in the year due to the auto industry, has stopped growing. All levels of government are losing jobs rapidly.
Market reaction was swift and negative. Note and bond prices had been quite strongly on the downside ahead of the report, which was released at 8:30 AM EDT. All week, sentiment in markets has been very strong, with many people starting to talk about a return to strong economic growth in the second half of the year.
This report pours cold water all over that story line. Notes and bonds immediately turned upward. The 10-year Treasury note was yielding 3.16% at 8:28 this morning. The yield plunged all the way to 3.06% just a few minutes afterward. Stock-markets had been indicating a mildly higher open, but immediately turned sharply downward. Clearly a lot of people were surprised by this report.
The bottom line, to me, is that the weak economic conditions of the second quarter will continue for some time longer. I’m not reading the report as a reason to panic. It’s not good news, by any means, but it’s not a disaster either.
Unless, of course, you’re a President of the United States who has been trying to convince people that you’re actually doing good things for the economy.