MacroScope

U.S. non-farm payrolls have come in below the Reuters Poll consensus for the past four months, the longest streak since an eight-month period in 2008-09 when the U.S. was in the depths of recession and, at one point, losing more than half a million jobs a month.

Compared with a few years ago when there was a very wild range of forecasts on a given jobs report — the widest spread polled since the financial crisis began was 575,000 for the May 2010 data — economists are now huddling together in a pessimistic pack.

For the July data, due out at 1230 GMT, the range of forecasts in the Reuters Poll (on a consensus of 100,000) has narrowed to a 107,000 spread between highest and lowest, compared with 132,000 for the June data.

A narrowing of that spread means either greater conviction that the data will be weak (only 80,000 jobs were created in June), or a weariness amongst forecasters of being undercut over and over again. More likely it’s a combination of the two.

Over the past two years, payrolls have come out weaker than the most pessimistic forecast polled five times while they have blown out the top end of the range only once.

A new survey from job placement firm Challenger, Gray & Christmas offers good news and bad news for U.S. job seekers. While some Americans have become more optimistic about their employment prospects, others have grown even more frustrated at their inability to find work.

The results were based on a random sample of 600 callers to Challenger’s yearly job-search advice hotline. Here are some key findings:

- Over the two-day event, the firm’s professional counselors helped more than 1,000 job seekers, 77 percent of whom were unemployed. That is down only slightly from the previous two years, when 81 percent of callers were out of work.

7,231,514. That was the real number of Americans receiving jobless benefits on last count – not the 381,000 new weekly applications that made the headlines.

It’s always heartening to get good news on the job market. Still, it’s easy for fully employed Wall Street analysts to get carried away with optimism after relatively minor improvements in the data.

Jobless claims figures are a case in point. True, new weekly applications for unemployment benefits fell to a 3-1/2-year low earlier this month, even if the latest report showed a larger-than-expected rise to 381,000. The trend, coupled with a moderately positive run in payroll employment growth, is encouraging. Yet it is important to remember that fewer layoffs do not necessarily imply more jobs are being created, as Eric Green at TD Securities notes:

So much for jobs being a lagging indictor. Economists at Goldman Sachs have constructed a handy little model for predicting recessions based on increases in the unemployment rate. We’ll let them explain the details in their own words, but here’s the short of it: If the jobless rate ticks up to 9.3 percent in July from 9.2 percent in June, then stays there in August, the U.S. expansion is toast:

Technically, the “rule” is as follows: if the three-month average of the unrounded unemployment rate increases by more than three-tenths of a percentage point (35 basis points to be exact) from a trough, the economy has either entered recession already, or will do so within six months. The intuition behind this statistical regularity is that if the labor market stalls for more than a short period, a vicious cycle of weaker income growth, weaker spending, and weaker hiring typically results. An important exception is in the early phase of economic recovery, when the unemployment rate often continues to drift higher for several months.  Currently, the three-month average rate is 9.07%, up from a recent trough of 8.90% in April. The unemployment rate would need to increase to 9.3% in July and stay there in August to trip the 35-basis point threshold; our forecast for Friday’s July labor market report is that the unemployment rate will remain steady at 9.2%.

Reuters columnist Agnes Crane breaks down the latest job report: