We made such a big deal of the importance of the release of the jobs report that sometimes the actual meaning of the data can be lost in the excitement. In all, it was a very big week for data releases. Asides from the employment releases during the week on Friday, we had two very important numbers unveiled. First was the measure of growth in personal income and spending. Personal income growth was lower than expected but personal spending came in as expected. We also had the first reading of growth in the economy for the second quarter of the year. The recent rise in interest rates and oil prices seem to indicate that we should have been expecting stronger growth than the last two quarters’ average rate of expansion of 0.6%. Well, the 1.7% rate of growth announced was certainly higher than the past two quarters, but still not indicative of strong economic growth.
Back to employment. We had some pretty good optimism coming into the main event, which was Friday’s jobs report. On Wednesday, ADP reported a larger than expected 200,000 increase in private jobs for July. On Thursday, the first time claims for unemployment reached their lowest level in five years. This optimism contributed to a strong stock market rally and a run-up in interest rates coming into Friday. However, the 162,000 jobs added for the month was actually lower than forecast and lower than the previous three months of data. Even the drop in the unemployment rate to 7.4% — the lowest in four years — was tempered by the fact that the labor force has been shrinking. On the other hand, as we pointed out last week we are coming to the point of being disappointed by data which would have been considered decent a short time ago. Our perspective has changed and that is a good thing because it is evidence of a stronger recovery in the long run.