A Strange but Positive Jobs Report


“Non-farm payrolls miss estimates,” the headlines say. But a deeper look at July’s Employment Situation from the Labor Department reveals a more nuanced and brighter reality.

One big item jumping off the page: The public sector, especially education, took a big hit. Some 20,000 (seasonally adjusted) state and local government jobs disappeared. “Education and health services” also cratered by almost 11,000. While this drags down the overall number, it doesn’t reflect badly on the broader economy.

Second, there was a very big contraction on a very specific and unusual line: “Sporting goods, hobby, book, and music stores.” Almost 32,000 jobs disappeared from that single category, more than 5 percent of its entire workforce, and the largest drop since the data set began in 1990. Can you say “Toys ‘R Us bankruptcy”?

Another oddity: Transit jobs shrank by nearly 15,000. I am not sure what caused this but it seems like one of those anomalies resulting from one city laying off bus drivers or something. After all, most other transportation related jobs like trucking, couriers, warehouses and vehicle manufacturing rose.

Those strange negatives subtracted 67,000 jobs last month. That makes the overall miss of 33,000 jobs (157,000 vs the 190,000 estimate) look a lot less bearish.

Don’t forget there were plenty of positives, like unemployment edging down to 3.9 percent. “Discouraged” and involuntary part-time workers kept edging down as well.

The months of May and June were also revised up by a combined 59,000 jobs. Perhaps even more important, the bigger trends we’ve cited on Market Insights all year remain intact.

For example, 37,000 workers took new positions in American factories in July. That was the highest reading in a year and the tied for the third highest this century.

Professional and business services, one of the biggest major employment areas in the economy, grew by 51,000 last month. And construction continued to add jobs (19,000) despite an undeniable slowdown in housing. (Residential building added just 600 jobs last month.)

One last thing to remember about July is that initial jobless claims (a separate weekly report) remained very low and at one point in the middle of the month hit a 49-year low. Plus, ADP’s private-sector payrolls report on Wednesday beat estimates.

In conclusion, overall employment growth in July missed last month but most of the longer-term positives seem to remain very much in place.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.