Tepid Job Report: Likely Just a Blip

Labor demand likely strong enough to keep pushing unemployment down.

Lost amid the enthusiasm about the strong economy is that the July jobs report came in on the low side, with 157,000 new nonfarm positions created. Is that a reason for concern? Probably not. Economists think it likely was statistical noise.

The report had been running a lot stronger in recent months: June was 213,000, and was revised upward to 248,000. Certainly, the July report could be revised up, too, although it’s doubtful the increase would be very sizable. Economists surveyed by Reuters had predicted nonfarm payrolls increasing by 190,000 jobs.

“Could this be the start of a more extended drawdown?” wondered Brad McMillan, chief investment officer of Commonwealth Financial Network, in a recent research note. “Reasons to believe it might be include the large contribution to job growth from manufacturing, which might be under threat from the tariff wars, as well as the growing shortage of workers.”

The report was “disappointing this time but it could be due to seasonal factors and some companies holding back on hiring,” Peter Cardillo, chief market economist at Spartan Capital Securities, told Reuters.

The consensus seems to be that this was just a blip. “Labor demand is strong enough to keep the payroll trend at 200K-plus, pushing unemployment down,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote on his commentary.

Periodically during the long recovery from the Great Recession, monthly job growth has surprised on the downside. This past March, it was only 155,000, and subsequently shot higher. Before, there were even scarier low numbers, namely May 2016’s 34,000 and September 2017’s 14,000.

“One down month isn’t enough to signal a trend change, and the long-term job growth trend remains above where it was in 2017,” MacMillan noted. “More than that, after a strong run—and job growth this year has been very strong—a weak month or two is normal, even expected.”

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