7月非农疲软但失业率下降：劳动参与率下滑所致

The difference between the falling unemployment rate on one hand and a very weak payroll on the other hand in July's print was mainly because in the household survey, it shows that the labor force participation continue to fall, driven by people, between age 16 to 24, and those folks are dropping out of the labor market. And because you have a shrinking labor pool, you don't just don't need a lot of, increase in hiring to cause unemployment rate to go down.

So it is a fall in unemployment rate that's due to the wrong reasons. That's so interesting to me because I always I find that part of that counterintuitive where it's like, well, the unemployment were right down because people gave up and stopped looking for work. It also seems an interesting indication that it's in those ages that you talked about. So it's younger people who are deciding not to be applying for these jobs.

What are they doing? Are they waiting to enter the workforce? Are they seeking higher education, or is that not clear? I think it could be a more, harmless explanation. It could be that it is July after after all, and people, especially the younger folks, folks who are waiting to go to college, the the college students themselves, they are just off vacationing, and they are just not working in their usual summer job and not looking for a summer job in in the thick of July.

And I wanna play a bit of sound here from Kevin Hassett, the president's economic adviser. He was on Bloomberg Television on Friday after these numbers were released talking about participation, talking about the data more broadly. Let's take a listen. The labor force participation is kind of on a downward trajectory, which means that the breakeven jobs number, that is the jobs number you need so that unemployment rate doesn't go up, is has gone from maybe a 120, 130,000 a few years ago to maybe about 40,000 now.

And so what it means is that what the market is used to look at at, oh, it's it's like a normal tread the water kind of jobs number if it's around a 100 is no longer true. Wanna get your reaction to what doctor Hasleth said there and also just have you talk a bit more about what you mentioned a moment ago, which is just the the pool of workers here is getting smaller and smaller. Yeah. So he mentioned this breakeven concept.

So economists estimate this monthly pace of job growth that's needed to keep the unemployment rate constant. And Kevin Hasleth just mentioned his estimate is 40,000. Our estimate is around 55,000. The Fed, in in a recent note, they think that it's closer to zero. So I think that's what he's trying to Kevin Hassett is trying to say to kind of point is that while while we are used to the, you know, 100 k type of monthly payrolls print going forward, even a soft ones that's, you know, between zero to 50,000 and in his mind, 40,000 is actually a tolerable and decent kind of number of job growth.

And and I think, basically, he's lowering the bar for what constitute a good labor market. When you look at the picture overall, there were a few places where you saw some job growth, and there were places that were hit by job losses a little bit more. Can you just talk us through the different sectors and some patterns that you're seeing? Yeah. So, the the places that produce the largest drag is local government education sector, and it saw a 50,000 decline in a job growth.

That's pretty substantial. I think this is this decrease, it is noteworthy, and it's not something that you can just sweep under the rugs. I think this is a sign that the higher long end of the yield curve that has been rising for the last three, four months already, that is starting to bite. When you have higher long term treasury yields, that puts upward pressure on mortgage rates, and that has been cooling the housing sector.

And, you know, local government derive a lot of their revenue, from the local property market. So when when local government's budget are for falling short in the first half of this year, going into the the new fiscal year, they will have less to allocate to schools. So that's what I'm, seeing. And, also, going forward to the fall, right before the September FOMC meeting, we have another jobs report. I continue to ex expect the local government sector, education sector to be weak because for this reason, I just don't think it's a one off thing.

Another place that's really weak is leisure and hospitality, and that is due to the reversal of the World Cup hiring. But here even here, I I I think it's, pretty alarming. So, originally, it was supposed to be, not alarming because, in spring, we saw that there was a huge, increase in hiring for leisure and hospitality. But in today's report, we also see a massive downward revisions to the last two months, job print.

In fact, 100,000 downward revisions to jobs. And a lot of it came from leisure and hospitality sector. You know, while we thought that in April and May, that was a huge increase in hiring in in hotels and food and restaurants, it actually didn't happen. It's or or it's a very mild kind of increase. And now with this last two months, so July and June's negative large negative prints in lesion hospitality, it basically means that on net, it's cutting down lesion hospitality level of employment from even before the World Cup.

So I think I think that's also pretty weak. All in all, I think the bad news in today's report trumped the positive news. The only really good sector and and in terms of hiring growth is construction, and that's driven by, basically data centers. Oh, wow. That's where AI is manifest in this in this report. I wanna go back to the data. And, of course, you swim in day to day in and day out. But I think there'll be people who look at these revisions and think there's an inherent problem with the data that we're getting on the job market today.

And you listen to the new Fed chair, Kevin Walsh, one of his many task forces is one that's centered on data collection and the way that the Fed looks at looks at data. Do you see inherent problems with the way that we kind of gauge the health of the labor market? Are we not getting the data that we need? Is there some sort of deficit that that is stark based on what we saw here in terms of the revisions today? Yeah.

So downward persistent downward revisions to jobs data has been the trend for the last three years, really. And whenever the direction of revisions is primarily toward one direction, in this case, downward, it suggests that there's something more structural going on that the first cut of the data is not able to show. And, usually, what that means is that the labor market is not as strong as as as as one thought. So this this means that whenever you see a blowout jobs front going forward, like over 200 k, I think we all have to take it with a grain of salt.

Now as to the precise cause of these downward revisions, well, it is from the birth and death model and then also from the lower response rate in the first survey of the month. And I think BLS is actively trying to address this problem. Earlier this year, the BLS announced a methodological change in the birth and death model that is supposedly, will be better able to capture these real time, increase in hiring and decrease in hiring from jobs going out of business or, new businesses forming.

I think I think the, I think the BLS and other federal agencies are actively trying to work on this problem, and it's it's not because, any federal agencies' is fudging the the numbers. And speaking of Kevin Walsh, they do have another meeting coming up. It looks like your projection is saying you're expecting giving weak payrolls and higher layoffs, which you've been telling us do you think is a stronger signal in the drop in employment rate.

We're also expecting a soft CPI to come out. You think that means Fed rates are gonna hold in September? Yes. So so many analysts after today's week drop job report says all atte