Wall Street took this as a weak jobs report, and it may be worse than people think.
The Bureau of Labor Statistics reported today that U.S. nonfarm payrolls, as measured by their survey of establishments, increased by a seasonally adjusted 92,000 workers in July, less than many analysts had been anticipating. I have long urged looking at these numbers together with other employment indicators, which at the moment give a considerably more pessimistic reading.
One good alternative source is Automatic Data Processing, Inc., who use the data for the 23 million Americans whose payrolls they process to come up with an alternative estimate of the number that the BLS is trying to infer. ADP’s estimate, reported on Wednesday, was that the economy added only 48,000 private sector jobs. The discrepancy between this and the BLS number is even bigger than it might appear, because ADP does not include government employees. According to BLS, the public sector shed 28,000 jobs in July, so to convert the ADP number into units directly comparable to the BLS number, one would subtract 28,000 from ADP’s 48,000, arriving at a mere 20,000 increase in total July employment implied by the ADP private-sector estimates together with the BLS government-worker estimates.
A third source to which I pay attention is the separate BLS household survey, according to which U.S. employment fell by a seasonally adjusted 30,000 workers in July. One benefit of watching those BLS household numbers is that they’re not subject to the birth-death adjustments that can make it difficult to recognize turning points with real-time establishment data.
I’ve been advocating using a weighted average of the three estimates (BLS establishment, ADP, and BLS household) to get the best impression of what is going on, recently recommending weights of 0.7, 0.1, and 0.2, respectively. That calculation comes to
(0.7)(92) + (0.1)(20) – (0.2)(30) = 60
or a net total employment gain of only 60,000 jobs for July.
Some would argue, and quite legitimately, that we should not put too much stock in one month’s numbers, and the poor July numbers look better when you average them in with the strength reported for June. Even so, things at the moment don’t look so great to me.