the report
On Friday September 7th at 8:30 EDT, the Bureau of Labor Statistics, part of the Labor Department, released its monthly Employment Situation report for August 2012. The headline figure is that the US economy gained 96,000 jobs last month.
That’s disappointing in several respects:
–it’s below the economists’ consensus of +120,000-140,000 new positions
–it’s considerably less than the +201,000 job additions reported by ADT earlier in the week
–it’s under the 150,000 or so new jobs needed each month to absorb new entrants into the labor force–meaning it’s not enough to eat into the number of long-term unemployed
–it suggests that the more favorable report for July (+163,000 jobs) is as much an outlier as the much weaker numbers from May and June.
the details
The 96,000 jobs consist of 103,000 new hires in the private sector, offset by -7,000 layoffs by state and local governments. The service sector continues to be a strong generator of new jobs. Construction seems to be bottoming. But for the first time in a while, the manufacturing sector is beginning to shed jobs.
the revisions
As regular PSI readers know, the ES report is revised in each of the two months following its initial release.
The initial figures for July were +163,000 jobs (+172,000 in the private sector, -9,000 state and local government layoffs). That has been revised down in the August report to +141,000 (+162,000, -21,000).
The figures initially reported for June were +80,000 (+84,000, -4,000). They were revised down in the July report to +64,000 (+73,000, -9,000). In the August report, the numbers were revised down again to +45,000 (+63,000, -18,000).
my take
the surprising thing about this report is that the S&P went up on the news.
After all, it seems to dash hopes that the US economy is going to accelerate from the current lackluster pace. To the contrary, it suggests that what we are seeing now is as good as things are going to get for employment–and chronic high unemployment is going to be a fact of life.
At the same time, the US stock market is holding above the 1420 line that has represented a very substantial barrier to advance.
What could this mean?
On the most elementary level, investors appear to have returned from the Hamptons with their buying shoes on.
I don’t think anyone can possibly believe that additional Fed action will make any substantial positive difference for the US economy. Nor do I think that current economic conditions domestically or in the EU or China or Latin America are a cause for joy.
It could be that investors have suddenly awakened to the fact that bonds are very expensive and stocks very cheap. But that’s been the situation for a very long while.
What I think is going on is that sentiment is changing. Investors appear to be starting to believe that the worst is over in world economies. Two implications of this belief: stocks aren’t going to get much cheaper, and it’s okay to buy at today’s prices anticipated earnings improvement in 2013-14.
The big imponderable is how long the current bullish mood will last.
my bottom line:
We should enjoy the ride–which might represent a crucial, positive, turning point for stocks–but be very wary for signs that the curent mood change is just a passing fancy.