The week in review
- The July ISM Mfg. PMI dipped to 52.8 from 53.0 in June
- Job openings fell to 10.7M from 11.3M
- Nonfarm payrolls rose 528K, unemployment fell to 3.5%
- Durable goods orders excl. transportation rose 0.4%
The week ahead
- July CPI and PPI
- Preliminary August consumer sentiment
- Import prices
Thought of the week
Following a series of disappointing economic data releases, including a second consecutive negative quarter of GDP growth, the July Jobs report blew past expectations and underscored that the economy still has strong demand for labor and tight supply, which is pushing wages higher. Notably, the labor market has now hit two milestones, having recovered all the payroll jobs lost in the pandemic recession and achieving the lowest unemployment rate (3.46% to two decimals) since May 1969, as shown in the
chart. Job gains were very widespread across industries with the bulk of gains in services. Surprisingly, job growth also accelerated in cyclical sectors such as construction and manufacturing,where activity data has weakened recently.
Wages rose a strong 0.5% for all workers with slight upward revisions to recent months, suggesting employees continue to have considerable bargaining power.
Apart from this report, there are still signs in the economy that the huge excess demand for labor is easing. JOLTS job openings have fallen in recent months and unemployment claims have been slowly rising since the middle of March.
Moreover, the economy is still facing plenty of drags on growth in the second half of the year. Still, the booming jobs report does provide strong support to Chairman Powell’s assertion that the economy is not currently in recession and we will need to see a softening in inflation data over the next few CPI reports (which we expect to happen) for the Fed to dial back its aggressive rate hiking path.