Nonfarm payrolls increased by 163,000, and the unemployment rate increased to 8.3% in July. Private sector payrolls increased by 172,000 while government employment declined by 9,000. The average pace of payroll expansion for the year so far is 151,000, which is approximately the same as the average for all of 2011. The gains were primarily in the professional and business services, food services and drinking places, and manufacturing. The manufacturing number was probably distorted by changes in the seasonal pattern of plant shutdowns in the automobile industry, contributing 13,000 to the payroll number. Removing the automobile payroll growth gives what I think might be a “cleaner” read of the payroll number of 150,000. After the weakness in May and June, July may mark a return to a more normal pace of job growth.
The return to a slow, but normal, pace of payroll growth probably pushes the Fed further away from new stimulus. That makes sense because I don’t think the Fed can really do anything to create jobs right now. During the financial crisis, the Fed played an important role, but primarily in propping up the financial system, not the overall economy. Now the focus—I think—should be on how to create an environment where businesses want to expand and hire workers. I don’t see any changes in the landscape before the election because the House, the Senate, and the President all seem to be at loggerheads with each other. No solutions are in sight for the near term. There aren’t ever really any “solutions” anyways, only trade-offs: Appeasing one group means irritating another. We’ll have to wait until November to see what sort of trade-off voters choose.