Weekly Economic Trends and Indicators
The Headlines:
Total nonfarm payroll employment in the U.S. increased by 73,000 jobs in July according to the Bureau of Labor Statistics (BLS), which was below expectations. Job growth for May and June was revised downward by a total of 258,000, bringing the revised job growth numbers down to +19,000 for May and +14,000 for June.
In a separate report, the BLS reported that total nonfarm payroll employment in the Davenport-Moline-Rock Island, IA-IL metropolitan area decreased by 700 from a revised 180,900 to 180,200 in June on a seasonally adjusted basis. Jobs in the metro area increased by 1,200 before seasonal adjustment from a revised 181,500 to 182,700. This marks the first time since December 2023 that seasonally unadjusted jobs are higher than the same month in the prior year. The unemployment rate for each of the four counties in the metro area remained below 5%.
The Details:
Nationally, health care and social assistance added 73,300 jobs in July, which was by far the largest gain and approximately equals the total gain. All other sectors gained or lost a smaller number of jobs, and the gains essentially balanced the losses.
Last month, we noted that there was an unusually large increase (+63,500) in state and local government education. This appeared to be an anomaly, possibly related to statistical adjustment. The large downward revision mentioned above (-133,000 for June) included a downward revision of 109,100 in state and local government education alone. As a result, there was actually a 45,600 decrease in state and local government education rather than a 63,500 increase.
Several sectors of the Quad Cities economy experienced job growth in the month of June. Mining, logging, and construction gained 500 jobs, building on a gain of 300 in May. Education and health services gained 400 jobs, as did trade, transportation, and utilities. Government lost 400 jobs in June in the metro area but remains over 5% higher than a year ago.
The Context:
The revisions to the national number for May and June caused quite a stir in the markets on the day of the release, culminating in the firing of the BLS commissioner. However, as we noted in this blog, there was an anomaly in the preliminary data that should have led people to expect a larger than average revision. In the case of state and local education, it was likely a timing issue that led to an inaccurate seasonal adjustment. The bottom line is that nearly all economic data is subject to revision. Early numbers help to give observers timely information on the direction things are going, while revisions to the data as more information is received help to refine that picture. All of this is done on a schedule that consumers of this data have come to expect.
Unfortunately, new challenges for data collection have arisen in the post-COVID era, While there are many ways that the collection and publication of economic data could be improved, the system of data collection in the U.S. is still highly regarded and remains a source of confidence.
The weaker job numbers definitely shifted market expectations for an interest rate cut at the next Federal Open Market Committee meeting. According to CME FedWatch, the probability of a rate cut jumped in response to the news. By this morning (August 12), with the addition of benign inflation data, the probability of a September cut reached 94%. The probability of 75 basis points of cuts by December is now over 50%. While this shift in expectations is a response to labor market weakness, most observers still anticipate economic growth to remain positive over the rest of the year.
Locally, our labor market weakness started to be felt in 2024 for a variety of reasons, not all related to broader national trends. With year-over-year job growth turning positive again, lower interest rates would be a welcome boost to the Quad Cities economy.
Next week: Inflation update
