Soft Jobs Headline Hides Industrial Turnaround

The July jobs report showed a decline in nonfarm payrolls by 23,000, but this is not indicative of an economic collapse. Initial unemployment claims remain near record lows when measured against the size of the payroll base, and layoffs are not flashing recession.

The unemployment rate fell to 4.1 percent in July, which is historically low and virtually unchanged since President Trump took office.

The bond market rallied after the report, with yields falling on the policy-sensitive front end and across major maturities. Stocks initially rose as well, as the report lowered the probability of a near-term Fed rate hike without signaling recession.

Private payrolls rose by 30,000 in July, which is not a blockbuster number but is positive. The economy has added 426,000 jobs so far this year, averaging about 61,000 a month, more than enough to maintain a full-employment economy in a secure-border world.