by Calculated Risk on 8/03/2012 08:30:00 AM

From the BLS:

Total nonfarm payroll employment rose by 163,000 in July, and the unemployment rate was essentially unchanged at 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and business services, food services and drinking places, and manufacturing.
...
Both the civilian labor force participation rate, at 63.7 percent, and the employment- population ratio, at 58.4 percent, changed little in July.
...
The change in total nonfarm payroll employment for May was revised from +77,000 to +87,000, and the change for June was revised from +80,000 to +64,000.

Click on graph for larger image.

This was a somewhat better month, and the revisions for the previous two months were mostly offsetting.

This was above expectations of 100,000 payroll jobs added.

The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate increased to 8.3% (red line).

The Labor Force Participation Rate declined slightly to 63.7% in July (blue line). This is the percentage of the working age population in the labor force.

The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although most of the recent decline is due to demographics.

The Employment-Population ratio declined to 58.4% in July (black line).

The third graph shows the job losses from the start of the employment recession, in percentage terms. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

This was more payroll growth than expected, but still fairly weak. (expected was 100,000). I'll have much more later ...

by Calculated Risk on 8/02/2012 09:29:00 PM

From the Financial Times: Draghi kills hope of instant action

Financial markets recoiled on Thursday after Mario Draghi demanded eurozone governments turn to existing rescue funds before any intervention by the European Central Bank in bond markets to shore up Europe’s monetary union.
Excerpt with Permission

Some analysis from the Joseph Cotterill at Alphaville: Was Draghi really a disaster? and from Tim Duy at EconomistsView: Second Policy Failure of the Week

On Friday:
• At 8:30 AM ET, the Employment Report for July will be released. The consensus is for an increase of 100,000 non-farm payroll jobs in July, up from the 80,000 jobs added in June. The consensus is for the unemployment rate to remain unchanged at 8.2%.

Some thoughts: Employment Situation Preview and from Binyman Appelbaum at Economix: Beware the Jobs Report of July

As ... Floyd Norris explained last month, one possible distortion that has arisen in recent years, thanks to the weakness of the economy, is that “seasonal adjustments make things look better than they are in the winter, when fewer workers are being let go than the government expects, and worse in the spring and summer, when the workers who were not let go cannot be rehired.”

• 10:00 AM, the ISM non-Manufacturing Index for July will be released. The consensus is for a decrease to 52.0 from 52.1 in June.

For the economic contest in August:

by Calculated Risk on 8/02/2012 07:47:00 PM

For amusement ... from the LA Times: What's in your vault? Uncle Sam audits its stash of gold at the New York Fed

For decades, the U.S. government has stashed gold five stories beneath Manhattan in a vault under the Federal Reserve's fortress near Wall Street.

Or has it?

Some conspiracy theorists suspect that the billions of dollars' worth of bullion might have been looted in a dramatic heist, a la the movie "Die Hard: With a Vengeance." Others claim that the gold has been used in a shadowy government transaction, or swapped with gold-painted bars. It's even caught the attention of politicians like Rep. Ron Paul and members of Germany's Parliament.

Now all of us may finally get some answers.

The federal government has quietly been completing an audit of U.S. gold stored at the New York Fed. The effort included drilling small holes in the bars to test their purity.

The Treasury Department has refused to disclose what the audit has revealed so far, saying the results will be announced by year's end.

This will probably launch more conspiracy theories ...

by Calculated Risk on 8/02/2012 02:00:00 PM

The last three employment reports were very weak: 68,000 payroll jobs added in April, 77,000 in May, and 80,000 in June. Some of this recent weakness might have been "payback" for the mild weather earlier in the year. Also there is the possibility that the seasonal factors are a little distorted by the deep recession and financial crisis - this is the third year in a row we've some late spring weakness.

Bloomberg is showing the consensus is for an increase of 100,000 payroll jobs in July, and for the unemployment rate to remain unchanged at 8.2%.

Here is a summary of recent data:

• The ADP employment report showed an increase of 163,000 private sector payroll jobs in July. This would seem to suggest that the consensus for the increase in total payroll employment is too low, although the ADP report hasn't been very useful in predicting the BLS report for any one month.

• The ISM manufacturing employment index decreased in July to 52.0%, down from 56.6% in June. A historical correlation between the ISM index and the BLS employment report for manufacturing, suggests that private sector BLS reported payroll jobs for manufacturing decreased about 8,000 in July.

The ISM service index will be released tomorrow after the BLS report.

• Initial weekly unemployment claims averaged about 365,000 in July, down from the 382,000 average for April, May and June. This was about the same level as in March when the BLS reported 143,000 payroll jobs added (Note: weekly claims have apparently been impacted by the timing of auto plant shutdowns).

For the BLS reference week (includes the 12th of the month), initial claims were at 388,000; near the high for the year.

• The final July Reuters / University of Michigan consumer sentiment index declined to 72.3, down from the June reading of 73.2. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This level - and the slight monthly decline - suggest a weak labor market.

• The small business index from Intuit showed 35,000 payroll jobs added, down from 40,000 in June.

• And on the unemployment rate from Gallup: U.S. Unadjusted Unemployment Rate Increases in July

U.S. unemployment, as measured by Gallup without seasonal adjustment, was 8.2% in July, up slightly from 8.0% in June, but better than the 8.8% from a year ago. Gallup's seasonally adjusted number for July is 8.0%, an increase from 7.8% in June.

Note: Gallup only recently has been providing a seasonally adjusted estimate for the unemployment rate, so use with caution (Gallup provides some caveats). Note: So far the Gallup numbers haven't been useful in predicting the BLS unemployment rate.

• Conclusion: The overall feeling is that the economy weakened further in July, and that would seem to suggest another weak employment report. However, if the weather "payback" is over (as several analysts have argued), the number of payroll jobs could be better than the last few months. And it is possible that there have been some seasonal factor distortions.

The ISM manufacturing report suggest a loss of manufacturing jobs, however the ADP report (private only), suggests the consensus is too low. Initial weekly unemployment claims were mixed too: the monthly average was near the low for the year, but the reference week was near the high.

Other negatives include the weak small business numbers from Intuit, and the decline in consumer sentiment.

Overall it seems like the July report will be weaker than expected.

For the economic contest in August:

by Calculated Risk on 8/02/2012 10:31:00 AM

It is difficult to find good and timely data on the number of household formations in the US, and also for the number of excess vacant housing units. The decennial Census is probably the best measure (and also the ACS), but those two estimates aren't consistent (the Census Bureau is looking into the reasons why). Another Census Bureau survey, the Housing Vacancies and Homeownership (HVS) is clearly flawed. The HVS indicates that the number of occupied households increase by 809 thousand over the last year - and that seems too low.

Jed Kolko, chief economist at Trulia, has been looking at Postal Service data.

From Jed Kolko at Trulia: Housing Glut or Housing Shortage? America’s Got Both

With this post, we present a new measure of vacancies, based on U.S. Postal Service (USPS) monthly data on the number of addresses that are and are not receiving mail. ... Here’s what we found.

Nationally, the number of occupied housing units – that is, those receiving mail – rose by 970,000 in the last year, from mid-July 2011 to mid-July 2012. Over the same period, the total number of housing units – those that could receive mail – rose by 760,000. The difference – 210,000 – is the reduction in the number of vacant units. That’s a 5% drop in the number of vacant units nationally. As a percentage of all units, the vacancy rate declined from 3.6% one year ago to 3.4% now.

In fact, vacancies have declined in 90 of the 100 largest metros.

There is much more in Kolko's post.

This data suggests close to 1 million household formations over the last year. I have less confidence in the count of housing units, since total completions only increased by a little more than 600 thousand last year (single family, multi-family and manufactured homes) - and there were also some demolitions.

Clearly the vacancy rate is falling - and the number of household formations exceeds the number of housing units added to the housing stock.