Investors Divided on July Jobs Numbers

Investors were torn over what to do in response to the July jobs numbers. Stocks seesawed all day before finally finishing flat.

There’s good reason why Wall Street was so divided. The jobs numbers were very mixed.

Here’s a breakdown of both the good and the bad from the latest U.S. employment report:

Good

• The unemployment rate dipped a couple ticks to 7.4% – its lowest level since December 2008. Last July, the rate was 8.2%.
• The retail sector added 47,000 new jobs, while the auto industry continued its miraculous recovery, adding 9,000 jobs.

Bad

• The U.S. economy added 162,000 jobs last month, less than the 185,000 that was predicted and below the 12-month average of 189,000 jobs per month.
• Average hourly earnings fell for the first time in nine months, to $23.98 an hour.
• The number of jobs added in May and June was revised down by a combined 26,000.
• Job numbers at the federal and state levels both declined.

All told, the “bad” appears to have outweighed the “good.” However, unemployment declining to a four-and-a-half-year low is a major psychological boost – even if the number is misleading given that many people have been dropping out of the government’s list of the unemployed simply because they gave up looking for a job.

At any rate, the jobs numbers were mixed enough that the Federal Reserve is unlikely to cease quantitative easing anytime soon. The Fed’s stated goal has been to wait to end its $85 billion bond buyback program only when the unemployment rate hits 6.5%.

Given that only 0.8% has been shaved off the unemployment rate in the last year, at this pace it may be another year before Fed “tapering” begins.