TD Economics

August 6, 2010

Data Release: Yet another disappointing month for the U.S. job market
• U.S. nonfarm payrolls fell by 131K in July (consensus was for a decline of 65K), while June’s figure was
revised down from -125K to -221K. This month’s headline decline was driven by a 143K fall in
temporary Census related jobs. But, even after excluding the Census, U.S. employment only grew by
12K.
• The private sector created 71K jobs, which was less than the market expectation for 90K. June’s
private sector job number was revised down to 31K from 83K.
• Within the private sector, goods producing employment grew by 33K, while the service sector generated
38K new jobs.
• The unemployment rate held steady at 9.5%, aided by a decline in the participation rate to 64.6% from
64.7%.
• The underemployment rate (which includes discouraged and involuntary part-time workers) also held
steady at 16.5% in June. The median duration of unemployment fell from 25.2 to 22.2 weeks in July.
• Average weekly hours rose modestly to 34.2 from 34.1 in June. While up considerably from a low of
33.7, weekly hours remain well shy of the 34.6 average seen during 2006 and 2007.
Key Implications
• Census-related hires will continue to negatively affect the headline non-farm payrolls report in the
months ahead. By the end of July, 164K people were still temporarily employed in connection with the
2010 Census; by December this figure will have fallen close to zero. Also, some of the recent volatility
in labor force participation can be attributed to the Census.
• July marked the seventh straight month of private sector job creation, for a total of 630K new positions
since the start of 2010. While private sector employment remains 7.3% off its pre-recession mark, the
job market has turned a corner toward a period of reliable – albeit slow – job growth.
• Given reasonable demographic assumptions and the current participation rate, capping unemployment
at 9.5% would require the creation of nearly 121K jobs a month. Yet the participation rate is bound to
rise, as many of the currently 1.2 million discouraged workers that have left the labor force reenter in the
future. Therefore, monthly job creation will have to be larger than 121K a month to meaningfully lower
the unemployment rate. Despite a positive outcome, July’s 12K non-census job growth falls short of this
mark.

• Indeed, the prospects for a significantly lower unemployment rate in 2010 are not promising. We are
projecting annualized GDP growth of roughly 2.5% during the second half of this year. As productivity
growth slows from its blistering post recession pace, this outlook is consistent with non-census related
job creation of around 150K per month for the remainder of the year.

Alistair Bentley, Economist

416-307-5968

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