August 8, 2011 – The July Nonfarm Payroll: Rocketing Back Up to Zero


3) The July Nonfarm Payroll: Rocketing Back Up to Zero. The monthly nonfarm payroll report finally surprised to the upside, the much watched figure coming in at +117,000, well above a consensus of +90,000. The headline unemployment rate is back down 0.1% to 9.1%. May and June saw healthy revisions up of +56,000 jobs.

Private sector hiring soared to +159,000. That was partially offset by what has become a permanent drag from government cuts of -37,000. The end of the partial shutdown of the state government in Minnesota was a big factor. The strongest sectors were in health care, +31,000, retail, + 26,000, and manufacturing, +24,000.
Some 6.2 million hapless souls have been unemployed for six months or longer.

While a definite improvement over past months, we are anything but back in the pink. To accommodate population growth and an outflow of new college graduates, the economy needs to create at least 150,000 new jobs a month. Seasonal adjustment excludes 1.2 million school teachers who are fired at the end of the school year, only to be mostly rehired in the following year.

My view is that the nonfarm payroll report has become too politicized to be of any real value. It now has a market impact of only two days at most. The US is suffering from a long term structural unemployment issue that no one can do anything about.

If corporations had more cash, such as from a tax free offshore profit repatriation, they would simply invest it in China, India, and Brazil, as they have done. If wealthy individuals had more money through a tax cut, they would just buy more gold, or keep the cash. The economic growth rate in the US is just too low to attract new investment needed to create jobs. The new customers are in emerging markets, not here.