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Instant view: July nonfarm payrolls fall more than expected

NEW YORK (Reuters) - Employment fell for a second straight month in July as more temporary census jobs ended while private hiring rose less than expected, pointing to an anemic economic recovery.

KEY POINTS: * Non-farm payrolls fell 131,000 the Labor Department said on Friday as temporary jobs to conduct the decennial census dropped by 143,000. * Private employment, considered a better gauge of labor market health, rose 71,000 after increasing 31,000 in June. * The government revised payrolls for May and June to show 97,000 fewer jobs than previously reported. * Analysts polled by Reuters had forecast overall employment falling 65,000 and private-sector hiring increasing 90,000. * The unemployment rate was unchanged at 9.5 percent in July for a second straight month, just below market expectations for a rise to 9.6 percent.

COMMENTS:

JASON BRADY, PORTFOLIO MANAGER, THORNBURG INVESTMENT MANAGEMENT, SANTA FE, NEW MEXICO:

“At first blush, it’s a little negative relative to last month, but hourly earnings are up and weekly hours worked is also better. If you are sitting there looking at five-year Treasuries, and you’ve said ‘there wasn’t any reason for the Fed to move,’ well, now there’s really no reason for the Fed to move. So it’s strengthened the belly of the Treasury curve.

“You get some justification for owning Treasuries at these yields because the Fed is going to be on hold longer.

“There is more stabilized hourly earnings, which mitigates the payroll numbers. The stability in unemployment rate at 9.5 percent isn’t that good, though.”

TOM SOWANICK, CHIEF INVESTMENT OFFICER, OMNIVEST, PRINCETON, NJ:

“The jobs figure was not so bad that the Federal Reserve next week will add to stimulus. Private payrolls that exclude government agencies rose by 71,000, less than forecast, but take a look at average hourly earnings which rose as well as average work week for all workers which increased. The market has come back from being down dramatically because it is interpreting this the same way. The data is not clean and we will need more information.”

JOHN BRADY, SENIOR VICE PRESIDENT, MF GLOBAL, CHICAGO:

“We’ve got a good little bid in the Treasury market here. Long story short, the headline number was weaker than expected, down 131,000 vs expectations of 65,000. The internals of the number are not as bad as the market is acting.

“Average hours worked increased and average earnings were up, this is probably not a bad number when the internals are digested.

“(This means) lower yields, and probably lower stock prices.”

FRED DICKSON, CHIEF MARKET STRATEGIST, THE DAVIDSON COS., LAKE OSWEGO, OREGON:

“(Stock) futures sold off on the news, and that’s not a surprise. It’ll translate into some speculation into what the Fed will do next week. They’ve been hinting they’ve been seeing weakening economic data, and it reinforces that we’ll be seeing low interest rates for an extended period.

“The conclusion you walk away with is there is marginal job creation in the private sector of the economy, but government job losses are significant. We’re seeing an economy that’s moving ahead slowly but not creating net on balance a lot of new jobs, and it points to continued expectations the economic slowdown we’ve seen will probably extend another two to three months, if not longer.”

STEVE BLITZ, SENIOR ECONOMIST, MAJESTIC RESEARCH, NEW YORK:

“We are in the big stall.

“There’s no double dip, there’s no next recession coming. This is more like what ended up occurring in Japan, just a low level of growth.

“The risk is, at this kind of a growth rate, that you raise the specter of deflation. The longer you go with low growth, let’s call it 2 percent real growth GDP, with this much excess capacity in labor and capital that it forces prices down.

“The Fed will probably talk more seriously about more quantitative easing and what they can do, but the truth is there isn’t really much. It’s not an interest rate problem, it’s demand for product.”

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR & ASSOCIATES;

“We’re not seeing the classical U.S. consumer-led recovery, it’s going to put much more focus on how much leadership we see out of the corporate side of things.

“It’s unlikely that equities will be able to break out of the trading range.

“If the dollar continues to be weak with these weak numbers, that could put upward pressure on treasury bond yields.

“It’s going to have quite an impact on Fed policy discussion and politics are already going to become an issue.”

CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK:

“On a scale of one to 10, the report is a six. It’s not bad. You had 71,000 jobs added to private payrolls. That the best in three months. The market does not care about the fact that you are down on the headline.

“Other good signs in the report included an increase in the average length of the workweek of 0.1 percent of an hour.

“Average hourly earnings, our only monthly proxy of wages, rose 0.2 percent after a distressing no gain in June.

“Add that together and it suggests that the liftoff point for GDP is not that bad for the third quarter with total hours worked up 0.3 percent of 1 percent. No one will lower their GDP forecast for the third quarter based on this report. That’s good news.

“The news on manufacturing jobs was also very good. In particular the large 0.5 percent gain in total hours worked in the factory sector means that industrial production to be released later this month will be up quite strongly.

“The household sector is a bit disappointing even though the unemployment rate is unchanged at 9.5 percent and that’s because you had offsetting declines in both employment and the labor force.”

TOM BENTZ, BROKER, BNP PARIBAS COMMODITIES FUTURES INC, NEW YORK:

“Bearish jobs data is initially weighing on oil. Equities turned negative also. The dollar is weaker but that is not helping crude market right now.”

THOMAS DI GALOMA, HEAD OF FIXED INCOME RATES TRADING, GUGGENHEIM SECURITIES, NEW YORK:

“The only thing I can say about this morning’s jobs figure was it was a pathetic report with the Fed actually in play now for next week. The revision on last month’s payroll is troubling and believe the Fed will lean toward QE at next week’s meeting.”

WAYNE KAUFMAN, CHIEF MARKET ANALYST, JOHN THOMAS FINANCIAL, NEW YORK:

“Obviously, this is disappointing. Average hourly was up a little, so that’s good. Weekly hours was up a little. But what this tells me is that we have a stagnant economy. We’re not creating jobs and we should be at this point. Typically, recessions have bounced back and are creating jobs by this point, which is why you have the argument between those who think we need more stimulus and those who say the stimulus isn’t working.

“I’m in the stimulus is not working crowd, and I don’t think more is going to help. Obviously you need a safety net for certain people, but until the government does things that will stimulate creation, which is not raising taxes or adding wasteful government spending, you’re going to have a stagnant economy that doesn’t create jobs.”

MARKET REACTION: STOCKS: U.S. stock index futures turn negative after weaker-than-expected jobs report. BONDS: U.S. Treasury debt prices turn positive. DOLLAR: U.S. dollar falls versus euro, yen.

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