Weak July Jobs Report Masks Underlying Labor Market Strength

According to economist Joe Brusuelas, the recent US jobs report is 'broadly unimpressive' and shows more noise than signal. The report showed a decline in 23,000 jobs in July, but at the same time, the unemployment rate decreased to 4.1%. This discrepancy suggests that seasonal issues at the Bureau of Labor Statistics may be playing a role.

Brusuelas points out that the sharp declines in leisure, hospitality, and retail employment are likely due to the post-World Cup labor market disruption. Additionally, the outsized decline of 50,000 in state and local employment looks 'highly suspect'. The economist expects both the top-line jobs number and unemployment rate to be revised up in subsequent data publications.

The six-month average of gains in employment stands at 97,000, which better captures the true underlying growth in the labor market. Brusuelas believes that this trend will reassert itself in the second half of the year, despite the recent decline. The economist remains optimistic about the US economy and labor market, expecting growth to accelerate to 2.5% or above.