Recorded August 2, 2019

July NonFarm Payroll Report: Great? Not so Great

This morning we got the release of the July NonFarm payroll report, and the general consensus among the analysts seem to be that it was s strong report, a solid report. I saw Larry Kudlow this morning on Fox Business talking about another "solid performance" in job creation.  But once again, once you look beneath the surface, and you don't have to look too deep, this is not a good report.

The Bar Was Set Pretty Low

First of all, the bar was set pretty low.  The consensus was 151,000 jobs.  That's not a lot of jobs, so it's not that hard to beat it, and we did.  We got 164,000 jobs.  But the reason we beat it was because we created more government jobs than the market expected. For private payrolls, the consensus was 160,000 jobs and we only created 148,000 jobs.  So we created 12,000 fewer private sector jobs than had been expected and we made up the difference by creating government jobs, whether they are for the Federal government or state government.

Public Sector Jobs vs Private Sector Jobs

But there's a very big difference between private sector jobs and public sector jobs, in that the taxpayer isn't on the hook to pay the salaries of the private sector workers. They're working in companies that are generating profits, so the salaries are paid for by the profits that the businesses generate.

The Government Does Not Generate Profits

The government doesn't generate any profit. It just has to suck up tax revenue; we have to pay for these.  So it's not a good thing that government gets more bloated and hires more people.  Especially since a lot of government bureaucrats tend to complicate things. They make everybody less efficient.  If we're hiring more regulators to slow down the economy and get in everybody's way, that's not a good thing. I'd rather have a lean, mean government. Of course, that's not going to happen.