Short but sweet from Barron’s Alan Abelson this morning:
"How bad was the employment report? Bad enough. Compared with the crowd’s expectation of 140,000 or so additions to payrolls — which in itself would have been nothing to write home about — a meager 113,000 jobs were added in July. And instead of holding steady as Wall Street’s soothsayers had forecast, the unemployment rate ticked up to 4.8%, the highest in five months, from June’s 4.6%.
The good news, at least for toilers, was pretty much limited to a brisk rise in average hourly wages: 0.4%, for the second month running. But what’s savory sauce for the goose may be a little too rich for the Fed, since it emits a distinctly inflationary odor.
In any case, our trusty economy watchers, Philippa Dunne and Doug Henwood of the Liscio Report, are not exactly ecstatic over the employment showing. They note that nearly half the gain in July was chipped in by health care, which generated 23,000 payroll additions, and bars and restaurants, which accounted for 29,000 of the new jobs. Neither obviously is an occupational area renowned for exceptional wage generosity. In contrast, manufacturing shed 15,000 jobs and the slump in housing unsurprisingly took its toll last month in the form of 9,000 lost slots.
As to what Bernanke will do, they cite the uncertainty created by the aforementioned conflicting trends of inflationary wage increases and rising joblessness. "Tuesday morning’s productivity and unit labor cost figures could prove unusually important," they suggest, "for the afternoon’s Federal Open Market Committee statement." So keep an eye cocked for those numbers."
Perhaps the Fed pause is somewhat less of a sure thing than many people believe . . . hence, the intra-day reversal yesterday.
UP AND DOWN WALL STREET
Barron’s, Monday, August 7, 2006