Nonprofit, nonpartisan journalism. Supported by readers.

Donate

Modest job growth numbers beat ‘low bar’ expectations

The economy finally got a break in better-than-expected unemployment numbers issued Friday morning with 117,000 jobs added and the unemployment rate ticking down 0.1 percentage point to 9.1 percent, according to a U.S. Bureau of Labor Statistics (BLS) report.

The stock market had been holding its breath following Thursday’s worst selloff in two years and nine down days in the past 10. After Washington dodged a default on U.S. debt, investors and traders shifted their focus to concerns over a report that U.S. growth stalled in the first half of 2011, fanning fears of a double-dip recession. In addition, renewed concerns over the Eurozone debt crisis drove European stocks to levels not seen since mid-2009  after the financial crisis.

So this morning’s news, while not changing the jobless outlook much, is the most positive since April and was welcomed simply because it was not another negative signal. (The stock market this morning initially rallied before falling into negative territory.)

Ben Marks, chief investment officer at Minneapolis-based Marks Group Wealth Management, said the jobs numbers beat a “low bar” of economists’ expectations ranging from 75,000 to 85,000 jobs added.  Marks pointed out that the economy needs to add 125,000 jobs a month just to keep up with new entrants to the workforce and it would take 200,000 new jobs a month to begin improving unemployment.

“We still have some work to do,” he said.

Marks pointed to average hourly earnings increasing 10 cents to $23.13 as an encouraging sign, but the fact that the average work week remained unchanged indicates employers still have some excess capacity in their labor force.

Marks cited consumer deleveraging and government job losses as two factors holding back a rapid economic recovery.

Consumer reductions in debt and spending are “good for the long term viability of the economy” but a challenge to near-term economic growth, Marks said. Continued reductions in government-sector employment, which has held back overall improvements in employment, is the ““bitter medicine” needed  to reduce government spending, he added.

“I don’t think we’re going back into another recession, but [we] are going to experience very slow economic growth for a couple of years,” he said.

Marks said the volume of shares traded in yesterday’s selloff was not high enough to indicate a “capitulation” or bottoming of negative sentiment. “It’s hard to predict what will happen today, but I think a lot of traders are not going to want to be long this weekend,” he concluded.

The number of workers unemployed for less than five weeks declined by 387,000 in July, mostly off-setting an increase in the prior month, while the number of long-term unemployed (those jobless for 27 weeks and more) — 6.2 million people — changed little over the month and accounted for 44.4 percent of the unemployed, the BLS reported.

Health care(+31,000), retail trade (+26,000) and manufacturing (+24,000) sectors added the most jobs in July.

The Minnesota Department of Employment and Economic Development is scheduled to release July unemployment figures Aug. 18.

You can also learn about all our free newsletter options.

No comments yet

Leave a Reply