Employment Report Not Helpful

Still on vacation, but found time to review the employment report, a good six hours after the rest of the world had the first shot.  Instead of the definitive report we were hoping for, we got a remarkably unhelpful report. On the margin, it points to additional easing.  But I can't say it strongly points in that direction.  It simply was neither bad enough or good enough to clear up any uncertainty about the impact of seasonal distortions in the data.  And thus, it really should be generally neutral, at least on the basis of where the Fed appears to be sitting.  Of course, I would argue that the Fed is sitting in the wrong place to begin with, and should already be easing further.  But that is another story for another time.
The basics of the report are well known at this point.  Nonfarm payrolls eked out a meager gain of just 80k while the unemployment rate held steady at 8.2%.  The nonfarm payroll numbers continued to exhibit the trends we saw last year:

I think Cardiff Garcia is on the right track when he says:

… we find the relationship between the seasonal shifts the past three years in these economic surprise readings to be a little too close to be all coincidence.

The Federal Reserve is struggling with this same question.  While the average gain over the past 3 months is just 75k, the average over the past 6 and 12 months is about 150k.  Arguably, 150k is not enough given the depth of the recession, and thus in and of itself calls for further action.  But the Fed doesn't seem to think so, otherwise they would have engaged in more easing already.  Which leads me to believe that while on the margin the headline numbers in this report suggest additional Fed easing, if the Fed choose to look through the possible seasonal distortions and see the longer term moving averages, they will not be inclined to act on this report.

Read more: http://economistsview.typepad.com/timduy/2012/07/employment-report-not-helpful.html