On the first Friday of every month, the federal government releases its “Employment Situation Summary” — or, in common parlance, the monthly jobs report. And unless you majored in economics in college or have an uncanny interest in fiscal policy, making sense of that report can be a hard slog.
For example, the two major numbers from this month’s jobs report are 162,000 jobs added during July (marking the 34th consecutive month in which the economy has added jobs) and unemployment of 7.4 percent — the lowest unemployment rate in more than four years. On the surface, it sounds like great news that that many people found jobs, and unemployment is at its lowest since the teeth-gnashing apex of the global recession in 2008-09.
But dig a little deeper, and it turns out that with context the number of new jobs isn’t so rosy after all. The addition of 162,000 jobs added is actually quite disappointing to economists, who were expecting the jobs number to be around 184,000 — and in the pre-dawn hours before the jobs report was released, “the so-called ‘whisper number’ (was) closer to 225,000,” the Wall Street Journal reported.
In that spirit, here are five plain-language takeaways from the July jobs reports:
The addition of 162,000 new jobs in July is neither bad nor great. "It's a much weaker number than was generally expected, and it's not troubling but it's a reminder that the labor market remains weak," Lord Abbett & Co. chief economic strategist Milton Ezrati said to NBC News.
Of greater concern than the “162,000 new jobs” figure falling below expectations is that the July jobs report revised employment figures from May and June — in the wrong direction. The July jobs report retroactively downgraded May’s job growth from 195,000 to 176,000, and changed the same figure for June from 195,000 to 188,000. “The government tends to underestimate growth during good times and overstate it during bad times, so downward revisions can suggest the labor market is weakening,” Ben Casselman reported for the Wall Street Journal.
A lot of the jobs being added aren’t going to be a great asset to the economy. Mizuho Financial Group economist Joshua Shapiro — a major player in the financial sector — told the New York Times, “The composition of job growth has not been particularly great. It’s a lot of temp services, retail, food services, health care. With low-end jobs contributing more than half the growth, the income generated would be not that great, and you wouldn’t be expecting it to drive strong consumer spending.”
Some early effects of the federal sequestration may be starting to show up in this jobs report. In July, the average workweek fell from 34.5 hours to 34.4, and the average hourly wage dropped two cents to $23.98. “It’s in these numbers that we may be seeing effects of sequestration-related budget cuts, as many government agencies have decided to put workers on one-day-per-week furloughs in lieu of laying off workers entirely,” Christopher Matthews wrote for Time magazine’s website.
Ben Bernanke’s interpretation of the jobs report matters a lot more than any politician’s. The Federal Reserve is actively trying to spur the economy with a bond-buying program called quantitative easing that aims to keep interest rates low. Yet at some point the economy should ideally grow strong enough for the Fed to taper off those policies. Even though 7.4 percent unemployment is definitely a step in that direction, the Fed chairman has conveyed he won’t start significantly scaling back quantitative easing until unemployment is at 7 percent.
Politico’s Patrick Reis reported, “At this point, the job reports are used as little more than talking points in the fiscal debate between the White House and Republicans, but they are a key indicator for the Federal Reserve as it weighs when it will begin to scale back its efforts to stimulate the stalled economy. (Bernanke) has said the central bank is watching for signs that it should scale back a series of monthly multi-billion dollar asset purchases that are aimed at driving down long-term interest rates and sparking new growth.”