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- While the consensus estimate for July’s jobs report is 870,000, Bloomberg Economics expects upside due to favorable seasonals in education; however, Philippa Dunne expects a smaller headline print of 400,000, driven by manufacturing weakness in the Midwest
- At 18,952, Challenger’s monthly layoffs surprised to the upside with their lowest print since June 2000; meanwhile, hiring announcements were an even smaller 18,281, the lowest of the post-pandemic era and the smallest since June 2019, when the economy was fully employed
- Excluding states that have opted-out, 9.4 million people are still collecting COVID-related jobless benefits; real-time data also suggests labor market improvement has stalled, with Homebase’s Employees Working Index sliding to -16.3% the week of August 1, a 1.8% dip
On Tuesday, September 20, 2005, Federal Reserve Governor Mark Olson flouted an unspoken tradition established nearly a decade earlier by dissenting at a Federal Open Market Committee (FOMC) meeting. Then CNN economics correspondent Kathleen Hays noted that, “Dissents are very rare, and not at all what one expects under the tightly controlled steps that Fed chief Alan Greenspan likes to orchestrate.” The rarity, however, emanated more from the position of the dissenter. Transcriptions of FOMC meetings didn’t begin until 1996. (One can only imagine the fireworks, of which we’ll never know, when Volcker battled mutiny on his own Board.) Since 1996, there have been two dissents by governors and 68 by Fed District Presidents. As you see in today’s chart, the formerly hell-raising governors swore to cosa nostra (red bars) while relative anarchy by maverick presidents broke out (blue bars).
President George W. Bush appointed fellow Republican Olson in 2001. The new governor then bore witness to the Fed’s helping inflate the biggest housing bubble since the Great Depression. At the time of his dissent, home prices were increasing at a record pace…which was just taken out in April, setting a fresh record per Case Shiller data. Olson likely knew that tightening risked pricking the bubble. Hence the irony of the first possible governor dissent exactly 16 years later at the upcoming September FOMC on the part of Christopher Waller who takes umbrage with Fed policy juicing a “white hot” housing market.
Waller has indicated he expects today’s nonfarm payrolls growth to be robust and he’s optimistic about the outlook for the U.S. economy. While the real time data show a slowing in activity, which we’ll get to, we’d buy all of you popcorn and a front row seat for a September dissent. It could happen given that’s the time stamp he’s put on an announcement next month. Per Waller, it “depends on what the next two jobs reports do. If they come in as strong as the last one, then I think you have made the progress you need. If they don’t, then I think you are probably going to have to push things back a couple of months.”
As for that July jobs report, the data are all over the map. You can drive a Mack truck through the forecast range that spans 350,000 to 1.2 million. Bloomberg Economics puts the number above the 870,000 consensus estimate due to highly favorable seasonals in the education sector: “Operating with slimmer staff during hybrid and remote learning this spring, school-related layoffs will be far smaller than the 1.2 million cuts that seasonal factors anticipate.”
At the opposite end of the spectrum is our good friend Philippa Dunne of the Liscio Report. In June, two-thirds of the states reported double-digit growth rates in year-over-year withheld tax receipts; that downshifted in July to just a third. Particular weakness was seen in the Midwest, which gels with the stunted growth in the factory sector. Dunne expects a headline print of 400,000. She also said she’ll be tracking the workweek closely given it’s seen two back-to-back declines.
An eyebrow will be raised if the workweek doesn’t tick back up given the howling about labor shortages. We would add that we saw further slowing this week in the American Staffing Association’s Index which, at -0.5%, saw its first monthly print in the red since April.
We’ll leave the ADP report out there as a possible anomaly until proven differently given its patch track record. As surprising as it was to the downside, Challenger’s monthly layoffs data was buoyant to the upside, coming in at 18,952, the lowest since June 2000. Coming in at an even lower level were the 18,281 in hiring announcements (green bars), the lowest of the post-pandemic era and the smallest print since June 2019, when the economy was fully employed.
And while still up a ginormous 38% over January 2020, according to Burning Glass Technologies, job postings for those with “Minimal” education have still decelerated to half their recent peak of +75.1%. Some of the open positions have no doubt been filled by side-lined workers who’ve lost their unemployment insurance benefits.
To that end, this week’s Department of Labor data on the special jobless claims programs created in the CARES Act is the first “clean” read given it goes through July 17th, one week after the last state of Arizona made its way for the early exits (red line). The balance of 9.4 million workers in these programs from states that did not exit early (yellow line) will likely stay on until just before the September 6th expiration.
Real time data suggest labor market improvement has stalled. DailyJobCuts.com’s listings of layoffs and business closures tally has picked up over the last month. And as noted by Bank of America’s Michelle Meyer, Homebase’s Employees Working Index for small businesses slid to -16.3% in the week ended August 1, down 1.8% from the prior week. To that end, she expects, “nonfarm payrolls to advance by 750,000, which is below consensus reflecting the relatively softer high frequency data.”
As for the potential drama come September 22nd, we suspect that Meyer’s being right will suffice to keep the heat on Powell, Williams and Brainard. If Waller is true to his word, despite housing’s clearly slowing, he just needs one more decent print on September 3rd to resurrect the governor dissent. Bring it on!