Karim writes:

  • Better than expected overall; private payrolls up 67k, consistent with recent trend.
  • Net revisions up 123k (July private payrolls revised from +71k to +107k)
  • UE rate up from 9.51% to 9.64%
  • Hours flat but July revised up from 0.3% to 0.4%
  • Avg hourly earnings up 0.3%
  • Private payroll strength even more impressive considering -61k swing in mfg employment (totally out of synch w/ism employment indicator)
  • Median duration of unemployment down to 19.9 weeks, from 22.2 last mth and high of 25.5 in June
  • U6 UE measure up to 16.7% from 16.5%

Conclusion: Beneath the surface, solid gains this quarter in the components that drive personal income: jobs+wages+hours. Politically, the headline UE rate and the U6 measure are a problem and will make the various fiscal stimulus measures more likely. So really may be best of both worlds for economy.


UE up as people reenter the labor force, which happens as jobs open up in this part of the cycle.

And low/negative productivity last quarter could be telling us businesses critically understaffed due to uncertainty are finally being forced to get to where they need to be to service current sales/client bases. So hiring rises faster than output for a while. This is also a good sign as that supports personal income and consumption.

There never was a double dip in the cards. It would have had to come from an outside shock. The federal deficit now seems more than large enough to continue to support modest top line growth, and any further increase will offer further support.

The ongoing federal deficits have also largely repaired household balance sheets, adding income and savings of financial assets to the non govt sectors, and continue to do so.

This sets us up for the ‘hand off’ to private sector deficit spending (credit expansion) taking over from govt sector deficit spending, usually via cars and houses. Car sales seem to already be improving, and housing has nowhere to go than up as well. Starts could double and still be at historically low levels.

So the outlook remains very good for equities, not so good for rates, and not so good for large share of the population that needs to work for a living, as most of the incremental wealth flows to the top.