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By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

July Payrolls Soggy, but Manufacturing Possibly Starting to Improve

The Bureau of Labor Statistics announced this morning that private-sector payroll jobs rose by +148,000 in July. While headline jobs (i.e., government as well as private-sector) saw a downward revision of -41,000 to the June level, private-sector payrolls saw a downward revision of only -14,000. Meanwhile, excluding the volatile construction and retailing sectors, the "core" jobs measure we track also rose by +148,000, with only a -1,000 downward revision.

The data are summarized in the accompanying chart. As seen there, private-sector job growth has been lower throughout the last six months than what it registered over most of 2018, and it has also been slightly below the prevailing rate of the last five years (red line in chart).

The bulk of this slowdown is due to a year-long slump in manufacturing. We are bemused by all the current talk about factory sector slowing, as if this were a very recent development. In fact, factory payroll data have been softening since January, and data on factory orders and production indicate a slowing that actually began in August 2018.

We emphasize this because the recent data hint at the beginnings of a rebound in US manufacturing, a point lost on many commentators. Factory production worker job losses slowed to a dribble in May and June, and today’s data showed a strong gain of 21,000 manufacturing production-worker jobs, alongside a slight, -0.1 hour decline in production-worker average workweeks.

Granted, total factory payrolls rose "only" +16,000, and all-worker factory workweeks dropped by -0.3 hours. In other words, production-worker payroll data for the factory sector were much stronger than the corresponding overall factory payroll data. What this suggests is that after 11 months of a production "stall," manufacturers are still cutting back on back-office help, but they appear to be beginning to ramp up production schedules again. This rebound is still tentative in the data, but it is a positive sign that many seem to have missed.

Meanwhile, hourly wage gains were modest. Our take is that wage growth has stabilized in 2019 at an annual rate right around 3.0%. This is slower than the 3.5% gains seen in 2018, but is still an improvement from the generally 2.5% growth over 2015-17 and is sufficient to drive continued decent growth in consumer spending.

All in all, overall job gains were slightly soggy but steady, and we are encouraged by the tentative signs of rebound that the manufacturing sector is showing.

Monthly Job Growth
Monthly Job Growth
Source: Bureau of Labor Statistics. As of 31 Jul 19

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

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