Jobs ‘Rigging’ Continues – CESBD ‘Adds’ 112,000 Mystery Jobs

So much for payrolls tracking declining tax withholdings. With many expecting a payrolls whisper number to come below the consensus print of 180K, last week the BLS reported that July payrolls soared by 255K, above even the highest Wall Street forecast, and a number made even more impressive by the upward revision to the June print from 287K to 292K. The unemployment rate remained flat at 4.9%, on expectations of a modest drop to 4.8%.

Finally, making a strong case for a December (or even September, however, the Fed will never hike before the election) rate hike, were the average hourly earnings which rose 0.3%, above the 0.2% expected, and well above last month’s 0.1%, and rising 2.7% compared to a year ago.

The change in total nonfarm payroll employment for May was revised from +11,000 to +24,000, and the change for June was revised from +287,000 to +292,000. With these revisions, employment gains in May and June combined were 18,000 more than previously reported. Over the past 3 months, job gains have averaged 190,000 per month.

After two months of wildly missing expectations, Wall Street has done it again, with the print coming above the highest forecast.

The household survey was also impressive, with 420 jobs added to 151.517 million, a 1.8% increase compared to a year ago.

The participation rate rose modestly to 62.8% from 62.7%, after the number of people not in the labor force declined by 184K. The number of unemployed people declined by 13K to 7,770 keeping the unemployment rate at 4.9%, above the 4.8% forecast.

More important, from Yellen’s standpoint, is that average hourly and weekly wages rose by 2.7% in July, the highest in over a year, as suddenly inflation appears to be running hot once more.

From the report:

Total nonfarm payroll employment rose by 255,000 in July. Job gains occurred in professional and business services, health care, and financial activities. Mining employment continued to trend down. (See table B-1.)

Professional and business services added 70,000 jobs in July and has added 550,000 jobs over the past 12 months. Within the industry, employment rose by 37,000 in professional and technical services in July, led by computer systems design and related services (+8,000) and architectural and engineering services (+7,000). Employment in management and technical consulting services continued to trend up (+6,000).

In July, health care employment increased by 43,000, with gains in ambulatory health care services (+19,000), hospitals (+17,000), and nursing and residential care facilities (+7,000). Over the past 12 months, health care has added 477,000 jobs.

Employment in financial activities rose by 18,000 in July and has risen by 162,000 over the year.

Employment in leisure and hospitality continued to trend up in July (+45,000). Employment in food services and drinking places changed little in July (+21,000); this industry has added an average of 18,000 jobs per month thus far this year, compared with an average monthly gain of 30,000 in 2015.

Government employment edged up in July (+38,000).

Employment in mining continued to trend down over the month (-6,000). Since reaching a peak in September 2014, employment in this industry has fallen by 220,000, or 26 percent.

Employment in other major industries, including construction, manufacturing, wholesale trade, retail trade, and information, showed little or no change over the month.

The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.5 hours in July. In manufacturing, the workweek was unchanged at 40.7 hours, while overtime increased by 0.1 hour to 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls also increased by 0.1 hour to 33.7 hours.

In July, average hourly earnings for all employees on private nonfarm payrolls increased by 8 cents to $25.69. Over the year, average hourly earnings have risen by 2.6 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $21.59 in July.

The change in total nonfarm payroll employment for May was revised from +11,000 to +24,000, and the change for June was revised from +287,000 to +292,000. With these revisions, employment gains in May and June combined were 18,000 more than previously reported. Over the past 3 months, job gains have averaged 190,000 per month.

The kneejerk market reaction, as we previewed in the case of a substantial beat, is one which suggest a rate hike may now come well sooner than later, if only based on the reaction in rates.