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The jobs report for July turned out to be somewhat better than forecast and notably stronger than recent months. It is not robust but the recovery continues and maybe is just a little stronger than believed.
 The week was basically divided into two parts—before the jobs report and after the jobs report. Before the Friday jobs report, equities drifted down. But a better-than expected employment situation for July lifted stocks for the week.
Stocks headed down during the first part of the week. Monday, indexes were flat to down modestly as investors sat on the sidelines ahead of central bank policy decisions by the Fed and ECB later in the week. Worries about potential central bank moves—or rather non-moves—were also the focus Tuesday even as U.S. data were mostly positive with modest gains in Case-Shiller home prices, consumer confidence, and personal income—though consumer spending was flat.
At mid-week, despite increased chatter that the Fed would do little, equities dipped after the Fed announced no change in policy but kept in place Operation Twist, guidance into 2014, and reinvestment of QE2. Stocks also dipped despite a relatively strong ADP private employment report and jump in construction outlays. Manufacturing numbers were mixed with ISM slightly negative and Markit slightly positive for July. Motor vehicle sales were close to expectations. Fed disappointment was the key factor though there was no apparent reason for the disappointment. Traders also worried about news from the ECB coming Thursday.
Equities declined Thursday and it was all about over promising by ECB president Mario Draghi failing to deliver earlier promises. U.S. initial jobless claims were up less than expected after a notable drop the week before. But traders were disappointed by lack of action by the ECB.
Equities shot up Friday on better-than expected payroll gains. The unemployment rate rose slightly in July but was seen as monthly data noise. Adding to lift was improvement in the ISM non-manufacturing index. Basically, Friday data showed the economy as a little better than believed—though still sluggish.
 Equities were mostly up this past week. The Dow was up 0.2 percent; the S&P 500, up 0.4 percent; the Nasdaq, up 0.3 percent; and the Wilshire 5000, up 0.1 percent. The Russell 2000 declined 0.9 percent.
Equities were mostly up in July. The Dow was up 1.0 percent; the S&P 500, up 1.3 percent; and the Nasdaq, up 0.2 percent. However, the Russell 2000 dropped 1.4 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 7.2 percent; the S&P 500, up 10.6 percent; the Nasdaq, up 13.9 percent; the Russell 2000, up 6.4 percent; and the Wilshire 5000, up 9.7 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 Treasury yields remain quite low but nudged up for the week on good news from the latest employment situation report. Except for Friday, daily movement was very modest and even the Friday boost in rates was not very notable.
Rates eased slightly on Monday and Tuesday on speculation that the European Central Bank would take action to defend the euro. Rates firmed Wednesday after the Fed took no new policy initiatives.
Rates slipped Thursday as the ECB failed to take new initiatives for stimulus and despite better-than-expected initial jobless claims. Flight to safety outweighed domestic data. But that was not the case Friday as overall payroll jobs advanced 163,000, topping expectations for 100,000. Improvement in ISM non-manufacturing also boosted yields.
For this past week Treasury rates were mostly up slightly as follows: the 5-year note, up 1 basis point; the 7-year note, up 3 basis points; the 10-year note, up 4 basis points; and the 30-year bond, up 4 basis points. The 3-month T-bill slipped 2 basis points while the 2-year note was unchanged.
 The spot price of West Texas Intermediate ended the week up modestly. The story was not complicated. Worries about Europe led prices down for three of the first four days of trading. Then on Friday, the relatively (emphasis on relatively) strong employment report sent crude up more than $4 per barrel.
Net for the week, the spot price for West Texas Intermediate rose $1.27 per barrel to settle at $91.40.
The latest economic news was mixed but more on the positive side, notably with improvement in payroll employment. Meanwhile, the Fed held steady on policy.
 At the end of the July 31-August 1 FOMC meeting, the Fed left policy rates unchanged and also left guidance unchanged. Basically, there were no policy changes. Little changed except for a downgrade to the economy. The fed funds target rate remains at a range of 0 to 0.25 percent and the Fed stated that rates are expected to remain exceptionally low through 2014. And Operation Twist continues through the end of this year.
Not surprisingly, the Fed acknowledged that the economy is not doing great—but did not use any language suggesting that the economy is dramatically weakening. And the Fed indicated that inflation is easing. Importantly, there was no mention of deflation—which would suggest future policy action.
Surprisingly, the only major risk mentioned to the economy was implicitly Europe and slower growth in Asia. There was no mention of the fiscal cliff problem but we may see more on that in the FOMC minutes.
The vote for the statement was 11-1 with Jeffrey Lacker dissenting, who preferred to leave out the time period reference for guidance.
Overall, the Fed is on hold. The Fed has set in motion Operation Twist to extend beyond the presidential election. Without further substantial weakening in the economy, the Fed likely will stay on hold until at least December. But it should not be forgotten that QE2 has not been unwound and monetary policy remains extremely loose.
 The July employment situation report was mixed but mostly positive. It was not dramatic but the payroll jobs gain actually improved in July. However, the unemployment rate headed the wrong way. The unemployment rate rose to 8.3 percent from 8.2 percent in June. But the more reliable establishment survey was more positive.
Payroll jobs in July increased 163,000, following gains of 64,000 in June and 87,000 in May. The net revisions for May and June were down 6,000. The market consensus was for 100,000.
Private payrolls rose 172,000 in July after advancing 73,000 the month before. Analysts forecast a 110,000 boost.
 Both goods-producing and service-providing sectors improved moderately. Notably, goods-producing jobs indicate that manufacturing is doing better than monthly surveys suggest. Total goods-producing jobs rose 24,000 in July after a 13,000 gain the prior month. Manufacturing rose 25,000 after a 10,000 boost in June. Construction edged down 1,000 after a 4,000 gain in June. Mining was flat in July.
Private service-providing jobs advanced 148,000 in July after a 60,000 increase the prior month. Latest strength was in professional and business services which increased by 49,000. The temp help subcomponent rose 14,000 in July. This subcomponent often rises in advance of permanent hiring.
The public sector contracted again but at a more modest pace than months ago. Government jobs fell 9,000 in July, the same as in June.
Average hourly earnings have been volatile. The wage rate slowed to 0.1 percent in July from 0.3 percent the prior month. Even though monthly numbers have been volatile, the trend is continued softening. The year-ago growth rate for average hourly earnings was 1.3 percent in July, compared to 1.5 percent the month before. The average workweek held steady at 34.5 hours, matching expectations.
Some analysts have pointed to the unemployment rate rise as indicating a worsening labor market. The best response is likely that one month’s change is just noise in the data. Looking at greater decimal precision, the rate rose from 8.217 percent in June to 8.254 percent in July. A 0.037 percentage point rise is not meaningful. Plus, the household survey is relatively small compared to the establishment survey. It is volatile on a monthly basis as seen in household employment falling 195,000 in July, rising 128,000 in June, and jumping 422,000 in May. The bottom line is that unemployment probably is not worsening but also is stubbornly high.
Looking ahead, some payroll data are somewhat optimistic for upcoming releases. The manufacturing component of industrial production is likely to be healthy in July as production worker hours rose 0.4 percent. The wages & salaries component of personal income may be positive as aggregate weekly earnings gained 0.2 percent.
Overall, the employment report was a little better than expected. Businesses are hiring but at a modest pace. The recovery is still on but at a modest pace. The latest data probably are good enough to keep the Fed on hold though another jobs report will be posted before the next FOMC meeting.
Consumer finances are improving but consumers are still being cautious about spending.
 The consumer sector was mixed in June as income jumped but spending stalled. Personal income in June gained 0.5 percent, following an advance of 0.3 percent the prior month. The wages & salaries component also showed strength, rising 0.5 percent after a 0.1 percent rise in May.
 Consumer spending was flat in June, following a 0.1 percent dip in May. By components, durables declined 0.1 percent after a 0.4 percent decrease in May. Nondurables, hit by lower gasoline prices, fell 0.6 percent in June, following a 0.9 percent decrease the prior month. Services spending rose 0.2 percent, matching the May pace.
On the inflation front, lower energy weighed on headline inflation with a modest 0.1 percent rise in June, following a 0.2 percent decrease in May. The core rate firmed a bit as expected, rising 0.2 percent after a 0.1 percent gain in May.
 Year-on-year, headline prices were up 1.5 percent, equaling May’s rate. The core was up 1.8 percent versus 1.8 percent in May. Both series are below the Fed’s long-term goal for inflation of 2 percent year-on-year, giving the Fed room for more easing if seen as appropriate. However, the economy seems to be growing at enough of a positive pace for easing to not be likely.
Nonetheless, the consumer is worrying a bit more than in recent months. The consumer sector is not contributing to the recovery as it had. With the rise in income, it currently may be an issue of confidence.
 One area where consumers are being active is auto sales—though the numbers have bumped up and down a bit on a monthly basis. But that is not unusual for auto sales where discounts are off and on.
Unit sales from manufacturers edged lower in July to a 14.1 million annual rate versus June's 14.4 million. Importantly, June was revised up due to revisions to seasonal factors. All categories edged lower in July but again the decrease was minimal.
While motor vehicle sales generally are attributed to the consumer sector, they actually are split between business (fleet purchases and rentals), consumer, and even government. We will have to wait for personal consumption expenditure numbers to see how sales affected each sector. Still, sales are holding up rather well.
 Consumer confidence picked up in July but remained at a low level. The Conference Board’s measure rose 3.2 points to 65.9. June was revised 7 tenths higher to 62.7. Job readings are central in this report and showed no significant change with more than 40 percent still describing jobs as hard to get. A bit more did see more jobs openings over the next six months but still pessimists are in the lead on this reading.
For future income, a higher percentage continues to expect a decrease than an increase.
Although actual income has risen, consumers have retrenched due to increased worries about the economy.
 Two national surveys on manufacturing are giving somewhat different readings on this sector for July with Markit a little more positive than ISM. Markit shows slowing but positive growth while ISM shows mild contraction.
Manufacturing softened slightly in July but still shows growth compared to June, according to the final results of Markit Economics survey where the data are slightly lower than the prior week's flash estimate. The manufacturing PMI for July was 51.4, down 4 tenths from the flash estimate and down 1.1 points from June. Growth in new orders is minimal at best, at 51.0 versus 51.9 for the July flash reading and 53.7 for June. This is one of the lowest new order rates of the recovery and points to thinning business in the pipeline.
 According to Markit, backlogs helped manufacturers continue to keep output up and they added to their workforces, though both at marginal and slowing rates.
The picture from ISM’s survey is more negative. The U.S. manufacturing sector is shrinking, especially new orders. The ISM's composite headline index remained under 50, at 49.8 in July compared to 49.7 in June. But the details showed greater trouble with new orders at 48.0, up slightly from June's 47.8 but still showing monthly contraction. Export orders were an increasing and central negative, at 46.5 for a 1 point drop from June and reflecting weakness in both Europe and Asia. Manufacturers, lacking new orders, are working down their backlogs which were very low at 43.0 for a 1.5 point monthly decline.
Production was still growing as was employment but both are at risk if orders do not rebound.
Both national surveys indicate that manufacturing is not as strong as earlier in the recovery. The current question is whether manufacturing is still growing or slowly declining. The latest regional Fed data are mixed on that question.
 Texas manufacturing numbers were mixed for July. The overall general business activity index dropped to minus 13.2 from plus 5.8 in June. However, the production index remained moderately healthy at plus 12.0 relative to 15.5 the month before.
New orders eased to 1.4 from 7.9 in June, suggesting slowing momentum but this indicator is volatile. The employment index was relatively strong at 11.8 versus 13.7 in June. Plant managers apparently are somewhat optimistic, boosting the workforce.
 The latest construction outlays report corroborates mild recovery in the housing sector. Construction outlays advanced 0.4 percent in June, following a 1.6 percent jump in May.
The gain in June was led by private residential outlays which increased 1.3 percent after a 3.1 percent boost in May. The new multifamily subcomponent jumped 3.4 percent, following a 6.9 percent spike in May. The new one-family component increased 3.0 percent in June, following a 2.2 percent gain the prior month.
Private nonresidential outlays edged up 0.1 percent in June, following a 1.3 percent rise in May. Public outlays were flat after a 0.5 percent boost in May.
On a year-ago basis, overall construction stood at up 7.0 percent in June, compared to 8.1 percent prior month.
The good news is that housing is showing a modest uptrend. While the multifamily subcomponent has shown strength in recent months, the single-family subcomponent is now gaining. And it is good that housing is improving as manufacturing is showing signs of slippage.
 Another sign that housing is on the mend is that home prices are rising—albeit from depressed levels.
Home prices firmed notably in May according to S&P Case-Shiller which showed an adjusted 0.9 percent gain. This was the third strong gain in a row following 0.7 and 0.8 percent readings in April and March and also a modest uptick in February.
Prices are coming off the bottom reflected in the year-on-year rate which is still in the negative column at minus 0.7 percent. Yet the direction is going the right way with 18 of 20 cities showing monthly growth led by Chicago and Atlanta which are two cities where home prices had been especially weak.
 While manufacturing is wavering, the bulk of the nation's economy is moving steadily forward, based on ISM's non-manufacturing sample where the composite index rose 5 tenths to 52.6. This level is not especially strong but details in the report are encouraging.
The new orders index rose 1 full point to 54.3. Business activity, which is an indication on output of goods and services in the sample, really took off, up 5.5 points from a depressed June level to 57.2 in July for the best rate of monthly growth since March.
A negative in the report was a 3 point fall in the employment index to 49.3, a sub-50 level, which was the first of the year and which indicates that the ISM's sample, on net, cut back on their workforce in July. But the rise in new orders hints at a snap back for this reading in the months ahead.
Monthly data have been volatile—especially for manufacturing. While manufacturing has slowed (or contracted, depending on the data source), housing has improved and the labor market may have strengthened. But a key issue for the consumer is confidence about the economy and doubts remain. Meanwhile, the Fed either sees sufficient economic growth to leave policy unchanged or simply believes the costs of additional ease outweigh the benefits. With the presidential election looming and the Fed wanting no appearance of partisan leaning, the Fed will likely find a way to stay on the sidelines until at least December if economic news allows.
A light week of economic news is highlighted by consumer credit and international trade. Confidence numbers are not great but credit data are hard numbers and could point to moderate consumer strength. Meanwhile, trade data are a big question mark due to weakness in Europe and slowing growth in Asia. But lower oil prices are likely to come into play.
Consumer credit outstanding jumped $17.1 billion in May for the largest increase since the $19.1 billion boost seen in November 2011. Gains for the latest month were seen in both revolving and nonrevolving credit. Nonrevolving credit, which is being driven higher by strong demand for student loans including in the latest month, rose $9.1 billion. Auto loans also played a supporting role. Revolving credit jumped a giant $8.0 billion which is by far the strongest gain of the recovery.
Consumer credit Consensus Forecast for June 12: +$10.3 billion
Range: +$5.5 billion to +$13.0 billion
Nonfarm business productivity declined an annualized 0.9 percent in the first quarter, compared to the initial estimate of a 0.5 percent dip and compared to a 1.2 percent rise in the prior quarter. Unit labor costs were revised down to an annualized 1.3 percent increase versus the first estimate of 2.0 percent, and following a 1.5 percent decrease in the fourth quarter. Productivity was nudged lower primarily on slower output growth. Output in the first quarter was revised down to a 2.4 percent rise versus the initial estimate of 2.7 percent and the fourth quarter gain of 3.7 percent. Unit labor costs were revised down on compensation which grew only 0.4 percent instead of the first estimate of 1.5 percent annualized. More recently, productivity may not be as healthy and unit labor costs may be up as second quarter GDP posted at an annualized 1.5 percent, down from the first quarter rate of 2.0 percent. Output numbers for productivity closely track GDP.
Nonfarm Business Productivity Consensus Forecast for initial Q2 12: +1.3 percent annual rate
Range: +0.9 to +2.9 percent annual rate
Unit Labor Costs Consensus Forecast for initial Q2 12: +0.9 percent annual rate
Range: -0.5 to +2.0 percent annual rate
The U.S. international trade gap in May narrowed, thanks largely to lower oil prices. The trade deficit narrowed to $48.7 billion from $50.6 billion in April. Exports rose 0.2 percent, following a 0.9 percent decline in April. Imports fell 0.7 percent after a 1.6 percent drop the prior month. The narrowing in the trade gap was led by the petroleum goods gap which shrank sharply to $24.9 billion from $28.1 billion in April. In contrast, the non-petroleum goods deficit expanded a little to $37.9 billion in May from $36.7 billion the month before. The services surplus improved to $14.8 billion from $14.6 billion.
International trade balance Consensus Forecast for June 12: -$47.5 billion
Range: -$48.5 billion to -$45.5 billion
Initial jobless claims rose 8,000 in the July 28 week in what was the smallest change after three weeks of severe volatility tied to adjustment for summer auto retooling. The latest level of 365,000 was right in line with the 4-week average of 365,500 which offers an interesting gauge for the full-month July to June comparison, and this comparison, which was down more than 20,000 from the late June average, points to improvement in the labor market. Continuing claims in data for the July 21 week fell 19,000 to 3.272 million with the 4-week average down 11,000 to 3.299 million for the lowest reading since early June.
Jobless Claims Consensus Forecast for 8/4/12: 367,000
Range: 360,000 to 385,000
Wholesale inventories rose 0.3 percent in May, a moderate gain but one that compared negatively with a 0.8 percent decline in wholesale sales which was the first decline since May last year. The mix made for the first rise this year in the wholesale stock-to-sales ratio, up to 1.18 versus April's 1.17. But the decline in sales was centered in non-durable goods including petroleum, where prices have been moderating very quickly, and also drugs where a heavy brand-to-generic shift is trimming dollar totals.
Wholesale inventories Consensus Forecast for June 12: +0.3 percent
Range: 0.0 to +0.4 percent
Import prices fell a steep 2.7 percent in June following a downwardly revised 1.2 percent plunge in May and a 0.1 percent decline in April. The decline in June was the steepest of the recovery. The export side, where the headline in minus 1.7 percent, was very similar with a 4.0 percent monthly plunge in agricultural exports a heavy negative.
Import prices Consensus Forecast for July 12: +0.2 percent
Range: -1.0 to +1.0 percent
Export prices Consensus Forecast for July 12: -0.1 percent
Range: -1.0 to +0.3 percent
The U.S. Treasury monthly budget report showed a June deficit at $59.7 billion. Receipts were up while growth in spending was down, making for a 6.8 percent decline in the nation's deficit 9 months into government's fiscal year. When excluding special factors, such as calendar timings for government payments, the deficit was down 12.7 percent. Looking ahead, the month of July historically shows a deficit for the month. Over the past 10 years, the average deficit for the month of July has been $72.2 billion and $103.6 billion over the past 5 years. The July 2011 deficit came in at $129.4 billion.
Treasury Statement Consensus Forecast for July 12: -$103.0 billion
Range: -$125.0 billion to -$99.0 billion.
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books, 2009.
Econoday Senior Writer Mark Pender contributed to this article.
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