The U.S. July employment data was a little better than expected, showing the economy is declining at a lesser pace.
Much of the improvement in the data appears to stem from the auto sector, where the Cash for Clunkers program has artificially boosted demand and where unusual production schedules are wreaking havoc with seasonal adjustments for payrolls, wages, and possibly production.
July payrolls printed down 247,000 and the June-May revisions totaled a 43,000 increase in an indication that an inflection point has perhaps been reached. However, unadjusted payrolls fell 1.295 million and this year’s odd pattern for auto production, where summer layoffs have not occurred, brings the overall reading into question since seasonal adjustments are based on the decidedly different historical patterns for the last five years.
The civilian unemployment rate improved 0.1 point to 9.4%, but labor force participation and the number of workers not in the labor force also fell. The last time the unemployment rate declined was April 2008, prior to the onset of the recession.
Average hourly earnings printed a weak plus 0.2% to a 2.5% increase over the year, with durables wages up, perhaps reflecting the new auto industry contracts.
— Market News International
