U.S. unemployment remained unchanged at 9.5% and nonfarm payrolls shrunk by 131,000 last month, the government reported this morning. That’s not good, but it’s not quite accurate either once you consider that July is lighter by 143,000 temporary census workers. If we focus on the private sector, nonfarm payrolls rose by 71,000 in July. That’s better, but it’s still well short of what’s needed to convince the crowd that the economy is on a sustainable path of growth worthy of the name.

But let’s return to the headline number for a minute. Looking at nonfarm worker totals including government jobs—the standard definition that usually makes the headlines each month—shows a rather grim trend of late, as our chart below shows. For the last two months, job destruction has been deeply negative. Again, most if not all of the loss is due to cutting Census workers loose.

That inspires looking at the trend in non-government nonfarm payrolls of late, which is shown in the second graph below. Clearly, recent activity looks quite a bit better after stripping out the government factor. Payrolls have risen on a net basis for seven straight months. The labor market, in other words, is recovering. The problem is that the recovery has slowed sharply since the spring.

If you’re inclined to see the bright side, there’s an encouraging uptick for July, which posted a net gain of 71,000 private nonfarm payrolls, roughly double the gain in June. Unfortunately, that looks like statistical noise next to the fact that we’re a long way from April’s 241,000 rise.
“The job market has lost steam and remains lethargic,” Sung Won Sohn, economics professor at Cal State University Channel Islands, told
Nigel Gault, chief U.S. economist at IHS Global Insight, agrees. As he explained via Bloomberg News today: “To the extent that we have a labor market recovery, it’s a slow one. I don’t see anything to indicate that the third quarter will be better.”
The downshift in momentum in the broader economy’s rebound has been obvious for several months and so today’s jobs report doesn’t really tell us anything new. As far back as May we noticed that it looked like risk aversion was rising in the markets. As it turned out, this was an early warning sign that the deflationary winds were blowing harder.
The question now is whether the D risk, having taken a bite out of asset prices and economic momentum over the past two months, is set to recede or rise? For the moment, you can argue either side with a fair amount of persuasion. The July numbers have only just begun to roll in; so far, the numbers are mixed. The ISM manufacturing and services indices suggest that these sectors continued expanding in July: the pace of growth slowed in manufacturing but inched higher for services. Meanwhile, we learned today that same-store retail sales for July rose a “tepid” 2.9%.
The bottom line: the debate about the economy is alive and kicking. Today’s employment report is vague enough to give bears and bulls ammunition to press their respective points. Next week’s light schedule for new economic reports isn’t likely to change anyone’s perspective (the main event: next Friday the government updates the numbers on consumer prices and retail sales for July). The vacuum of uncertainty, it seems, is set to roll on.