Depending on which data you look at, employment in the U.S. either picked up in July or dropped by the most in a year.
Employers added 163,000 workers to payrolls last month, the biggest gain since February, according to the Labor Department’s so-called establishment survey released in Washington today. A separate poll of households showed hiring dropped by 195,000, the largest decline since June 2011, as the jobless rate climbed to a five-month high of 8.3 percent.
The figures are being closely watched by economists for clues to the outlook at a time when the European debt crisis and the risk of U.S. fiscal cutbacks raise concern the world’s largest economy will slow. The mixed survey readings make it important to step back and look at the broader contours of the labor market, according to economists such as Bruce Kasman.
“When you look at both the surveys smoothed out over three months, the divergence almost disappears and it feels like a mediocre labor market,” Kasman, chief economist for JPMorgan Chase & Co. in New York, said in an interview. “There’s a sort of sigh of relief that we’re not slipping into something particularly weak, but we’re also not holding strong momentum here by any means.”
Payrolls grew by 105,000 on average from May through July and household employment climbed by 118,000, the data showed.
The jobless rate is derived from a survey of about 60,000 households that is conducted by the Census Bureau and includes groups like the self-employed and agricultural workers that are not captured by the payroll figures. The latter is calculated based on a Labor Department survey of almost 500,000 worksites.
After adjusting the data to make it comparable to the payroll count, the household figures showed a 108,000 gain in hiring in July, according to the Bureau of Labor Statistics. Since the previous expansion ended in December 2007, adjusted household employment has decreased by 4.09 million compared with a 4.74 million drop based on the payrolls survey, the data show.
The household survey may be more accurate at turning points in the economy because it is more likely to pick up hiring and firing at small companies and new firms that may be under the government’s radar. Yet the benefits of that real-time information are offset by the fact that the survey is much smaller and the results are therefore more volatile than the establishment figures, Kasman said.
Coming into the July jobs report, indicators suggested a softening in growth, yet the broad message from today’s numbers is that “the downward shift in the momentum may be starting to arrest itself,” Kasman said. At the same time, at best the U.S. is creating about as many jobs as would be needed to hold the jobless rate roughly stable, he said.
The unemployment rate, which climbed in July from 8.2 percent in June, has been stuck above 8 percent since February 2009, one reason why the Federal Reserve this week said it is prepared to take new steps if needed to boost the economy. Today’s employment report probably doesn’t change the odds of further easing by Fed policy makers at their next meeting on Sept. 12-13, Kasman said.
“It hasn’t shifted the bar enough to take the Fed’s September meeting off the table,” Kasman said. They need to see “more upside surprises” to make them reconsider.
One way to get a better read is to look for patterns in an array of about a dozen labor market indicators, including weekly jobless claims and the Institute for Supply Management’s surveys on manufacturing and services, Kasman said. That provides a more consistent picture, he said.
At this time, “companies are being hurt by uncertainty and weakness abroad, and being helped by an increase in earnings in past quarters and by the fact that the economy is growing,” he said. “We have a business sector that is expanding, but expanding cautiously.”
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