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Whats going on in the labor market?

August 9, 2012 by Peter

Hopefully if you follow the markets you have been keeping an eye on the labor market updates that came out last week. If you have you noticed the below two data points that came out:

  • The labor report was much better than expected.  Private payrolls jumped 172K vs expectations of 110K.   The unemployment rate jumped to 8.3%.  The bottom line is: this is not recessionary data by any means.  It’s not a great expansion, but it’s also not contraction.  Muddle through continues.
  • The ISM Services report showed a 52.6 reading.  That was better than the 52 analysts expected.  Again, this is expansionary data.

Econoday has a nice summary:

“The great bulk of the nation’s economy is moving steadily forward, based on ISM’s non-manufacturing sample where the composite index rose 5 tenths to 52.6. This level isn’t that strong but details in the report are encouraging led by new orders which rose 1 full point to 54.3. This is right in line with the 4-month average of 54.2. Business activity, which is an indication on output of goods and services in the sample, really took off, up 5.5 points from a depressed June level to 57.2 in July for the best rate of monthly growth since March.

 A negative in the report is a 3 point fall in the employment index to 49.3, a sub-50 level, which is the first of the year and which indicates that the ISM’s sample, on net, cut back on their workforce in July. But the rise in new orders hints at a snap back for this reading in the months ahead.” 

So overall, the US economy continues to look not great, but globally speaking better than most.  These labor numbers are far from good, and it’s a bit alarming to see the market react so optimistically to “ok” numbers.

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