The dollar tanked and the the S&P 500 made a new all-time high when the headline news of the jobs report came out. The probability an interest rate hike for December increased from 32.1% to 45.4% (calculated using 30-day Fed Fund futures prices).
Our trusted media reported headline news such as
However, the news, which many investors and traders trust to make their decisions, has failed to look into the data in the report to understand what it really says.
The Devil in The Jobs Data
ZeroHedge pointed out that Obamacare offset weak industrial and consumer sectors. In another article, they point out that private payrolls grew an unadjusted +85k in July, far less than the seasonally adjusted headline number of +217k.
Reviewing the labor report myself, I discovered that the only education category for those 25 and older with an increase in actual jobs from June to July was High school grads with no college. The other 3 categories, including those with some college with or without any degree had a decrease in actual number employed. (Table A-4)
The number of unemployed from permanent job loss (layoffs) increased from June to July from 1.848 to 2.014 million (+166k). Even the “seasonally adjusted” number, a fictitious number which is of course rosier, showed a 104k increase in permanent job loss.
Of course, with increasing layoffs come longer unemployment times, steadily increasing since May. Average number of weeks unemployed went up in July to 28.1 from 27.1 in June.
Weakening US Economy
All this data points to a weakening US economy. Educated workers are losing their jobs, being increasingly laid off. Those on unemployment are having a harder time finding a job. The increases that the headline refers to are high school grads taking jobs that do not add much to our economic strength, as they do not replace the high paying jobs being lost. Many, of course, are temporary jobs due to the election season, which helps to explain the increase in high school grad jobs.
Clearly, as long as we trust a news media to do our analysis for us, and do not hold them accountable to critically review the jobs report, we’ll continue to be deluded by rosy headlines despite the truth being much less bright for the US Economy.