Despite improved payroll jobs the economy is weak

The growth in payrolls of 163,000 as reported by the U.S. Labor Department was said to have fueled Friday’s stock market rise. But is this really something to herald? The level is not even sufficient to handle the monthly inflow of new people to the workforce (e.g., new college graduates). Let’s put this number into perspective. The U.S. Labor Department’s household survey reported a drop of 190,000 jobs with 150,000 workers leaving the work force. This pushed the labor participation rate down to 63.7% – just above a recent 30-year low. The Monster employment index dropped from 153 in June to 147 in July showing a drop in recruitment.  New unemployment claims (released Thursday) increased slightly from last week to 365K. But this is well above the rough average of 330K in 2005 before the last recession. The ISM manufacturing index dropped from 53.5 in June to 49.7 in July. Numbers under 50 indicate contraction.

The drop in the stock market’s transportation sector mirrors the soft economy. If there loads of goods trucked around the country this sector would not have dropped so hard.

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