Non-Farm Payrolls for July printed at 163,000 jobs added,
exceeding economist expectations of 100,000 jobs added. The range
of estimates was very wide, with economists expecting anywhere from
50,000 to 165,000 jobs. Also, the unemployment rate ticked up to
8.3 percent on expectations of a 8.2 percent rate. The new data
show that the economy may be rebounding from a second-quarter
The employment report was highlighted by strength in
service-sector jobs. Goods-producing jobs, including manufacturing
and construction jobs added only 24,000 jobs. The service sector
added 148,000 jobs. Professional and technical services jobs,
including computer systems and legal services, added 49,000 jobs
and health care added 19,000 jobs.
Markets continued earlier gains, as U.S. equity futures climbed
to pre-market highs. The uptick in the unemployment rate indicates
that layoffs still occurred despite job gains, showing that there
has still been adjustment in the labor market since certain
industries collapsed beginning in 2007.
One of the most difficult parts about deciphering the employment
reports in 2012 has been the effects of seasonal adjustments, which
have added or subtracted hundreds of thousands of jobs per month.
For July, it appears that seasonal adjustments added some 377,000
jobs and that the unemployment rate was 0.3 percent higher when
measured on a non-seasonally adjusted basis.
The Non-Farm Payrolls report may crimp expectations of further
Federal Reserve easing, as the stronger-than-expected report shows
that the economy may be improving from the slowdown seen in the
second quarter. Economists point to the slowdown in Europe as the
root for at least some, if not most of the slowdown domestically.
Recent data has shown that Europe may be bottoming, and with data
in China showing similar patterns, there may be credence to the
argument that the U.S. economy may be bottoming.
However, the Fed could still be forced to act to drive down the
unemployment rate. Part of its mandate is to maintain full
employment, and with the unemployment rate above 8 percent further
Fed action may prove necessary. Many individuals left the labor
force following the Great Recession, but this pattern may be
reversing. Although the labor force participation rate declined in
July, the unemployment rate ticked higher as few people left
full-time jobs for part-time jobs.
Friday's report evidenced a continued disparity between college
graduates and high school graduates. The unemployment rate for
those with a bachelor's degree or more held constant at 4.1
percent. For those with only a high school diploma, the
unemployment rate rose to 8.7 percent from 8.4 percent. This gives
credence to the theory that companies are increasingly seeking
applicants with a better educational background and more work
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