Jobs Report: Headline Misses Lowest Estimate, Wage Growth Firm, Unemployment Rate Ticks Back Down

Donald Trump will get yet another opportunity to brag about the virility of the U.S. economy on Friday, assuming the July jobs report is some semblance of strong.

The June report was another solid print, although earnings growth remains subdued and the unemployment rate ticked higher. Considering what Trump said ahead of last week’s GDP data (comments delivered in Illinois last Thursday seem to suggest the President is going to make a habit out of tipping these top-tier data points) one might have expected Trump to give hints ahead of time if the numbers looked good, but his Twitter feed was silent in the lead up to the release.

Headed in, Barclays was at 175k on the headline (notably, the bank thinks employers might be spooked by “increasing concerns over protectionism”). BofAML was more optimistic, projecting 225k. Goldman was at 205k and 0.2% MoM on AHE noting that while they’re “constructive on medium-term wage growth, unfavorable calendar effects [should have] weighed on July hourly earnings.”

On Wednesday, the Fed delivered an upbeat take on the U.S. economy – the statement contained five instances of the word “strong”. That sets the stage for a September hike, although Donald Trump would probably prefer it if Jerome Powell reconsidered in light of what dollar strength is doing in terms of helping America’s trade partners weather the tariff storm.

A week ago today, Trump held a nationally-televised press conference at the White House to celebrate what he called “amazing” second quarter GDP data. That underscores the extent to which the President is leaning heavily on these tier-one econ prints when it comes to producing evidence to support the contention that his trade war isn’t yet having a deleterious effect on the domestic economy which is still riding the fiscal stimulus/tax cut sugar high (likely on the way to a Q3 let down).

In any event, here are the expectations and priors:

• Change in Nonfarm Payrolls, est. 193,000, prior 213,000
• Change in Private Payrolls, est. 190,000, prior 202,000
• Change in Manufact. Payrolls, est. 25,000, prior 36,000
• Unemployment Rate, est. 3.9%, prior 4.0%
• Underemployment Rate, prior 7.8%
• Average Hourly Earnings MoM, est. 0.3%, prior 0.2%
• Average Hourly Earnings YoY, est. 2.7%, prior 2.7%
• Average Weekly Hours All Employees, est. 34.5, prior 34.5
• Labor Force Participation Rate, prior 62.9%

And here are the numbers (spoiler alert: it’s a miss):

• U.S. July Nonfarm Payrolls Rose 157k; Unemp. Rate at 3.9%
• Nonfarm payrolls, net revisions, 59k from prior two months
• Participation rate 62.9% vs prior 62.9%
• Avg. hourly earnings 0.3% m/m, est. 0.3%, prior 0.1%
  • Y/y 2.7%, prior 2.7% est. 2.7%
• Nonfarm private payrolls rose 170k vs prior 234k; est. 190k, range 160k-252k from 32 economists surveyed
• Manufacturing payrolls rose 37k after rising 33k in the prior month; economists estimated 25k, range 5k to 27k from 16 economists surveyed
• Unemployment rate 3.9% vs prior 4.0%; est. 3.9%, range 3.8%-4% from 76 economists surveyed
• Underemployment rate 7.5% vs prior 7.8%
• Change in household employment 389k vs prior 102k

That headline print looks like it missed even the lowest estimates – the range was 161k-257k.

(Bloomberg)

The White House can take comfort in that AHE print, which suggests wage growth is still solid (if not “amazing”, as Trump would say). As an added bonus on the wages front, there’s nothing in the AHE number that screams “have to hike now!” to the Fed.

The administration will likely also be pleased with the 37,000 increase in manufacturing payrolls. That’s the most since December and well ahead of estimates.

Additionally, it’s worth noting that the June trade deficit widened to $46.3 billion from $43.2 billion in the prior month, the Commerce Department said this morning.