If there is one economic report that makes the most dramatic impact on the investment markets it is the employment situation. No different than any other month is the anticipation that Wall Street maintains for the jobs report due out tomorrow, August 6, at the time of this writing. It appears to be taking on even greater significance this month, which reports on July data, as it becomes maybe the most crucial factor as to the underlying health of the economy at a time when there is so much disagreement among economists and the financial community as to its direction.
On a monthly basis, usually the first Friday, the Bureau of Labor Statistics releases the employment situation. There are a number of labor market statistics provided, based on two separate surveys conducted, from the report. The first is the Household Survey which results in the unemployment rate, clearly the most familiar statistic to the typical news reader. It is the number of unemployed persons divided by the total number of persons in the labor force and comes from a survey of 60,000 households. Other figures derived from this survey include the labor supply and discouraged workers who are no longer seeking employment. This latter category actually falls out of the unemployment rate calculation and tends to understate the true extent of the employment dilemma.
The second survey is known as the Establishment Survey and includes 400,000 work sites. Nonfarm payroll employment is the most well known indicator from this survey as business establishments report the number of workers currently on their payrolls. Some of the key indicators that are obtained are average workweek and average hourly earnings.
Once the data is released the analysts begin digging a whole lot deeper than the headline unemployment rate. As I previously alluded to the employment data gives the most comprehensive report on how many people are looking for jobs, how many have them, what they’re getting paid, and how many hours they are working. This provides key information to gauge the current state, as well as the future direction, of the economy. For the financial community this provides important information that helps to determine what sectors offer the best opportunity for investment.
Our economy is clearly in a major tug of war between slow, but steady, economic growth or the possibility of slipping back into some level of recession. Tomorrow’s job report will hopefully offer some clarity to the question of which we all seek an answer. A disturbing jobs report would not be received kindly by the markets that are hoping to maintain some recent momentum. I for one do not choose to guess the results. I will consider my investment decisions post report release. By the time you are reading this blog the data will have been released and analyzed from start to finish. Here’s hoping for the economies sake that it is good!
