Recession Triggered: Payrolls not big, just 114k rise as rising jobless rate triggers 'Sahm Rule' recession

In the payroll preview last night we asked “how bad it will get“, and we got the answer moments ago when the BLS reported that in July, the US added just 114,000 payrolls, a big miss of expectations of 175,000 and also a big drop from the downwardly revised June print of 206,000, now (as always) revised to just 179K. This was the lowest impression since December 2020 (at least before even more revisions)…

… and a 3 sigma error on the mean estimate of 175K.

Of course, these numbers being released by the corrupt Biden, forgive the Kamala Department for the wanted shit, the previous months were revised down as usual, with May revised down by 2,000, from +218,000 to +216,000, and the change for June was revised down by 27,000, from +206,000 to +179,000. With these revisions, employment in May and June combined is 29,000 less than previously reported. It improves because, as shown in the chart below, 5 of the last 6 months have been revised down.

Unlike previous months when the household and establishment survey diverged massively, this time the two numbers at least had the same sign, even though the number of people employed (according to the household survey) increased by half of the number of payrolls, only 67,000…

…which means that while the printing of fake payrolls is now finally over, the number of workers actually employed has not changed over the past year, as shown below.

Of course, we can't forget that all job numbers are heavily skewed and manipulated, and July was no different with the birth/death model adding a ridiculous 246K “statistical” jobs to the unadjusted print. That doesn't translate apples to apples, it's safe to say that the actual number of adjusted payrolls would be much, much lower if it weren't for this ongoing fabrication.

But while we've known for some time that the actual payrolls numbers are far worse than reported, the real shocker in today's “data” is the long-awaited admission that the U.S. is they are effectively in recession because, as the rule is called pro-Biden/ Kamala Cluadia Sahm's socialist indicates that a recession has now been unleashed. The rule, for those who don't remember, is that a recession is already underway if the unemployment rate (based on a three-month moving average) rises half a percentage point from its low last year. And that's what just happened, with the unemployment rate rising 0.6% from a year low.

One thing to note here is that the unemployment rate was 4.3% increased by 0.2% for people on temporary layoff which increased by 249,000; this was mainly due to Hurricane Beryl, so expect the unemployment rate to drop to ~4.1% next month, unless of course it's the Democrat's strategy to go to election with a Sahm recession in hand.

Among major ethnic groups, the unemployment rate rose across the board (except for blacks), and the Hispanic unemployment rate hit a two-year high.

Elsewhere, the employment rate of 62.7% was up 0.1% from 62.6% the previous month and above expectations for an unchanged print.

Some more details from the report:

• The number of people working part-time for economic reasons rose by 346,000 to 4.6 million in July. These people, who would have preferred a full-time job, were working part-time because their hours had been reduced or they were unable to find full-time work.
• The number of unemployed people currently looking for a job rose by 366,000 to 5.6 million in July. largely offsetting the previous month's decline. These individuals were not counted as unemployed because they were not actively looking for work in the 4 weeks prior to the survey or were not available for employment.
• Among the unemployed who wanted a job, the number of people marginally attached to the labor force of 1.6 million was little changed in July. These people wanted and were available to work and had looked for work at some point in the previous 12 months, but had not looked for work in the 4 weeks before the survey. The number of discouraged workers, a subset of marginalized people who believed there was no work available for them

With disappointing jobs, predictably, wages also cooled more than expected, and in July the monthly increase in average hourly earnings rose just 0.2%, below the 0.3% forecast and below last month's 0.3%. On a year-on-year basis, the 3.6% growth rate also missed expectations of 3.7% and was down from a downwardly revised 3.8%.

The average workweek for all private nonfarm payroll employees decreased by 0.1 hours to 34.2 hours in July. In manufacturing, the average workweek decreased by 0.2 hours to 39.9 hours, and overtime decreased by 0.1 hours to 2.8 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls decreased by 0.1 hour to 33.7 hours.

In other words, taking into account the large drop in hours worked, average hourly earnings growth was even lower, at around 3.4%-3.5%

Looking at the composition of reported jobs, we find that employment continued to increase in healthcare, construction, and transportation and warehousing, while information lost jobs.

• Health care added 55,000 jobs in July, similar to the average monthly gain of 63,000 over the previous 12 months. In July, employment increased in home care services (+22,000), hospitals (+20,000) and nursing and residential care facilities (+9,000).
• Construction employment in July (+25,000), in line with the average monthly gain of the previous 12 months (+19,000). Employment in specialized contractors continued its upward trend in July (+19,000). Good luck with that considering the epic crash in new home construction.

• Employment continued to grow in transport and storage (+14,000), with job gains in messengers and messengers (+11,000) and warehouses and warehouses (+11,000). These gains were partially offset by job losses in transit and ground passenger transport (-11,000). Transportation and storage has added 119,000 jobs since the recent low in January of this year.
• Employment in social assistance continued its upward trend in July (+9,000), but at a slower pace than the average monthly gain of the previous 12 months (+23,000).
• Information employment fell by 20,000 in July, but is little changed for the year.
• Public employment changed little in July (+17,000). Government employment growth has slowed in recent months, after increasing employment in 2023 and the first quarter of 2024.
• Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; Retail trade; financial activities; professional and business services; leisure and hospitality; and other services.

And visually:

Commenting on the report, Bloomberg's economist team had this to say:

“July nonfarm payrolls suggest the cooling labor market shows little sign of stabilizing, and is not gradually 'normalizing,' as Powell characterized it after the July 31 FOMC decision.

“Some of the weakness in payrolls can be attributed to Hurricane Beryl, but not all of it, and in any case the impact of the storm should reverse in the coming months. However, the increase surprisingly strong unemployment rate was mainly due to layoffs and people taking longer to find work, not the weather.

“Furthermore, with the Bureau of Labor Statistics' 'birth and death model' still overstating employment based on net new business creation, we believe the underlying pace of monthly employment growth is likely below 100,000, below the consistent rate of unemployment.We expect the unemployment rate to continue to rise, reaching 4.5% by the end of the year. Not only is a September rate cut likely, there is now a 50 basis point cut.”

And here's RBC analyst Janet Mui who agrees that a 50bp rate cut is now in play: “Coupled with higher jobless claims, the contraction in the manufacturing hiring survey and the July jobs report, the Fed is likely to start cutting interest rates next month and s 'expect to cut more aggressively than previously forecast.Risk assets react negatively on growth concerns, while bond/gold/defensive sectors rally as investors seek safe havens “.