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August 6, 2010– (Vol. XI, No. 98)
August 6, 2010– (Vol. XI, No. 98)

U.S. Watch

Non-farm payroll employment decreased 131,000 in July with the loss of 143K temporary Census jobs. The private sector created only 71K jobs. This is disappointing from our standpoint since we were expecting twice this amount of private job creation. However, the July job report must be put into perspective. Private average weekly hours rose 0.3% while private average hourly earnings were up 0.1%. It may seem small numbers at first glance but these apply to 107.7 millions of U.S. private workers. This means that despite the poor headline number, the U.S. wage bill was up a strong 0.5% m/m in July. As today’s Hot Charts shows, with only one month in the quarter, the wage bill is already growing at a 2.3% clip in Q3, meaning no retrenchment in consumption. That said, the 3-month moving average of private job creation slowed down from 150K recently to only 50K in July. To avoid a disinflationary environment, the U.S. economy must create more jobs than the increases in labour force in order to bring back down the unemployment rate. Recent private job creations are simply not high strong enough to achieve this goal. While this morning’s report does not point to a double- dip of the U.S. economy, it certainly gives the Fed more reasons to seek further boosting the economy.

Yanick Desnoyers

U.S.: Consumption is supported by the wage bill

Private-sector payrolls and 3-month moving average Thousands (m/m) 300 Private payrolls 200 100 0 -100
Private-sector payrolls and 3-month moving average
Thousands
(m/m)
300
Private payrolls
200
100
0
-100
3-month M.A.
-200
-300
-400
-500
-600
-700
Even if private payrolls
disappointed in July…
-800
-900
07M01
07M07
08M01
08M07
09M01
09M07
10M01
10M07

Private sector wage bill and personal consumption expenditures

% (q/q, annual rate) 10 Consumption 8 Wage bill 6 4 2 0 -2 -4
% (q/q, annual rate)
10
Consumption
8
Wage bill
6
4
2
0
-2
-4
…the wage bill
growing
is
2.3%
-6
-8
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010

NBF Economy & Strategy (data via BLS)

NBF Economics & Strategy Group (514) 879-2529

Stéfane Marion, Chief Economist and Strategist