Another month has passed and another jobs report is here for evaluation. Most reports are wildly optimistic, citing a big increase in employment as a win for the economy. On the surface, it’s safe to feel encouraged by the report, but as always, closer scrutiny can be much more telling.
Here is a complete breakdown of the numbers, their reliability and what they mean for the future of America and your personal investment opportunities.
New Jobs
The biggest news in the report was a staggering 255,000 new jobs. This is a net gain that subtracts jobs lost, mostly from the mining industry, before the total is posted. The report was also surprising in the distribution of the new jobs. An almost even split showed 150,000 new part-time jobs with just over 100,000 new full-time positions.
Also, the biggest industry for the month was professional and business services, filling 70,000 openings. This is significant mostly because these are the services that pay the highest wages on average, suggesting an increase in national buying power.
The other major job creators were leisure and hospitality at 45,000, government with 38,000 and healthcare numbering 43,000. The only major industry to post a net job loss was mining, which lost roughly 7,000 jobs in July.
The diversity of new jobs helped sustain the trend of increasing wages. By the end of July, the average was up another 8 cents, bringing the new national mean wage to $25.69. This represents a total increase of 2.6 percent since July of 2015, and it is the highest year-end improvement since the beginning of the Great Recession almost ten years ago.
Other minor changes to employment work week length and overtime averages. Both increased by 0.1 hours to reach a total average of 34.5 and 3.3 hours respectively.
Unemployment
With over a quarter of a million new jobs, you might expect the unemployment rate to have slashed yet again. Instead, it remained completely unchanged at 4.9. The rate has shown roughly no change for the past three months. This is strong evidence to support the growing movement that claims unemployment is an ineffective measurement for economic growth, strength and stability.
In fact, the total number of net job increases reported by the department of labor for the past three months is just shy of 600,000. Considering there were fewer than 100 million people reported unemployed, these numbers should represent a change of roughly 0.5 percent. Instead, we have seen a shift of less than 0.1 percent. This implicates the extreme failure of unemployment reporting, which many suspect has been misrepresented for the past 8 years.
A look at less biased numbers help to paint a clearer picture of the economic situation. Short-term unemployment did in fact decrease by 255,000, but long-term unemployment has been largely unchanged.
Workforce participation and employment-population ratio also both changed by less than 0.1 percent. Putting it all together shows a jobs report that is manipulated to try and boost confidence to increase spending and further stimulate the economy. Overall, the employment situation in the country has not changed by any noticeable margins.
What to Expect
Thankfully for investors, the accuracy of jobs reports are far less important than their perceptions. In the wake of the findings, stocks across the board have gained value, and analysts have raised their previously abysmal predictions of GDP growth for the year. The numbers have been adjusted from 1.6 percent all the way up to 3.7 percent.
This means the S&P 500 is likely to continue its comfortable climb, and most general investments are safe for gains. Treasury holdings will also remain safe for the rest of the year as the Fed is not expected to follow through on its earlier promise to hike rates. Expectations now suggest that increases won’t be seen until the end of 2016.
Politically, the jobs report will continue to support the Obama Administration’s narrative. They will congratulate themselves on a job well done, despite the lack of real, tangible change.
You can also expect the Clinton campaign to jump on the report as an example of left-wing success. While it is far from the hotter topics of the election cycle, it will be chalked up as another win, especially by left-biased media.
Regards,
Ethan Warrick
Editor
Wealth Authority
