July jobs report not all bad

Posted at 10:31 AM, Aug. 9, 2006

An interesting piece of the jobs report is that the unemployment rate fell in the management, professional, and related occupations category to 2.5%. Jobs in this category include, attorneys and accounts. These tend to be higher paying jobs. Thus, the latest jobs report may be a sign that less people are making more money. Despite the monthly increase in overall unemployment, overall job growth year over year is still positive. Year over year growth is more reliable than month to month statistics. Perhaps last month's report is a statistical blip rather than a sign of actual weakness in the labor market. The small business owners that I talk with are desperate for qualified workers and the local Starbucks is hopping at all times of the day and on weekends too, from what I can observe. No sign of reduced spending or decreasing hiring needs there. Another interesting note is that the 6 month unemployment rate was 4.7% and as it has been for several months. 4.7% is very low from an historical perspective.Why the focus on unemployment and growth? I don't think I can say this enough: People with jobs keep and buy homes. As the economy slows, consumer at the very least become reluctant to buy large ticket items, like homes. This causes sales to at least slow. If the economy slows more than a little than companies shed jobs and people without jobs do not, in most case can not, buy homes. Also, homeowners who lose their jobs and often are forced to sell and this causes prices to decline. Thus, a solid stable growing economy with low unemployment is a great environment to buy and sell homes. The evidence in the July unemployment report does not look bad once you dig into the details. Sources for these comments are Gene Epstein, Tom Sullivan, Michael Santoli all from the August 7 Barron's, and the jobs report from the BLS - http://www.bls.gov/bls/newsrels.htm.