Job Growth — The Ship May Be Leaking but Is It Sinking?

August 1, 2004 — The 32,000 increase in payrolls in July, following just 78,000 in June (revised from 112,000) was disappointing and the reaction in the bond market was swift. However, given the volatile month-to-month history of the payroll data and the fact that the weakness is not substantiated with other employment data, we would caution against extrapolating too much out of one or two readings. We do not believe the underlying trend in employment growth has suddenly changed, more likely we are seeing an adjustment for a bit of exaggerated strength earlier in the year. The break in momentum as well as the divergence between the Establishment and Household surveys does bring up a couple important questions – namely, what is the trend and which survey is giving us the correct indication of that trend?