Jobs report even weaker than it seems

Markets reacted strongly to the news that U.S. non-farm payrolls rose a mere 18,000, far below expectations. As disappointing as that may look, the details are even worse.

First of all, previous increases in payroll survey employment were revised down.

Secondly, average weekly earnings fell 0.3% as hourly earnings were flat and the average work week fell 0.1 hours. However, at the same time earnings for May was upwardly revised by 0.1%.

And thirdly, the other survey, the household survey, showed a decrease in employment by 445,000. As a result, the entire increase in the employment to population ratio since the cyclical low of 58.2% has been wiped out. The 0.9 percentage point drop in the unemployment rate since then is thus entirely the result of peopke dropping out of the work force, discouraged by the shortage of jobs.

This report thus confirms the picture of an economy that could be described as stagnant at best.

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