Implications: The job market remains strong, adding 164,000 to nonfarm payrolls in July, almost exactly what the consensus expected. Meanwhile, civilian employment, an alternative measure of jobs that includes small-business start-ups, increased 283,000. Although some pessimistic analysts may dwell on the downward revision of 41,000 to payrolls over the prior two months, only 14,000 came from the private sector while 27,000 were government jobs and so not a sign of a weaker economy. In spite of the increase in civilian employment, the unemployment rate remained steady at 3.7% as the labor force grew by 370,000. However, the U-6 unemployment rate, which also includes "discouraged" workers and those who have part-time jobs who say they want to work full-time, fell to 7.0% from 7.2% in June, hitting the lowest level since 2000, at the peak of the original internet boom. There were a few other positive details in today's report. First, average hourly earnings rose 0.3% and are up 3.2% from a year ago (compared to a 2.8% gain in the year ending in July 2018). Second, the median duration of unemployment fell to 8.9 weeks, tying the lowest level since 2008. When workers lose their jobs, they're getting new ones fast. And third, the employment-to-population ratio increased to 60.7%, also tying the highest level since 2008. However, not all the news on the labor market was good. Total hours worked in the private sector declined 0.2%. For the time being, take that drop with a grain of salt. We've had some similar monthly declines in the past few years and most of those months were followed by a surge in hours worked. As always, we like to look at what the report means for workers' purchasing power. Combining the +0.3% growth in average hourly earnings with the -0.2% drop in hours worked still leaves total wages up 0.1% in July and up 4.4% in the past year, which means plenty of firepower to drive consumer spending higher. Today's report shows why we think the Federal Reserve didn't need to cut rates earlier this week, and why they shouldn't cut rates further.
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