Reversing a two month upward trend, the US unemployment rate decreased to 9.1% (from 9.2%); the broader underutilization rate decreased to 16.1% (from 16.2%).
§ A net +117k jobs were created in July, surprising economists whose consensus estimates called for a 75k increase; as an added dose of good news, May and June payrolls were revised up by +56k.
§ Approximately 13.9M persons remain unemployed; long-term unemployed, those who have been out of work for 6+ months, remained flat at 6.2M (44.4% of all unemployed).
§ The labor-force participation rate, the share of the US population in the jobs market, decreased to 63.9% (from 64.1%).
§ Average hourly earnings increased 0.4% to $23.13; on an annual basis, this metric has increased 2.3%...barely enough to offset cost of living increases/inflation
Broad-based gains in the private sector
§ Health care (+37k), professional and business services (+34k) and leisure & hospitality (+17k) experienced sizable increases.
§ Manufacturing (+24k; with transportation equipment contributing +14.4k ) bounced back as supply chain disruptions stemming from Japan’s earthquake continue to ease; construction (+8k) also reversed previous losses.
§ The retail sector increased (+26k) with clothing and accessories stores contributing modestly (+3.4k).
§ State and local governments pared 37k from their payrolls; quite alarmingly, since peaking in September 2008, the US’ public sector has contracted by 611k – with ~40% coming from education.
What’s in store? Key watch items…
While recent events (e.g., US debt reduction, Thursday’s market correction, etc.) have been well chronicled, we should also be wary/hopeful of the following macro factors:
On the bearish side:
§ Are we double dipping? US GDP in Q2 11 came in at 1.3% with Q1 11 revised downward to 0.4%. According to the Bureau of Economic Analysis, when growth historically dips below 2%, a recession is already underway (Note: Since 1970, this was the case in six of the seven instances when this has taken place).
§ Euro Zone. While the European Central Bank took significant steps to tame the debt crisis contagion by recently purchasing Portuguese and Irish bonds, several risk factors merit focused attention: unsustainable Italian and Spanish bond yields (which are currently exceeding 6%) and youth unemployment (which is currently exceeding 20.3% for 15-24 year olds according to Eurostat).
On the bullish side:
§ US Business Investment. During the first half of 2011, business investment in new equipment and software increased 7.2%. According to the Federal Reserve, nonfinancial companies held $1.91T in cash and other liquid assets – the highest level since the early 1960s. Increased investment may come as the economic recovery picks up steam in the second half (as the Fed still believes).
§ Japan. Based on the Bank of Japan’s recent assessment, their economy rose at a record pace in June – signaling a broadening recovery from the March earthquake. Japan’s index of leading indicators (a future-focused metric) increased 3.8% while their index of coincident indicators (a current state metric) increased 2.5%. Japan’s recovery bodes well for industries whose supply chains were disrupted.
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