July Nonfarm Payroll Data Emphasizes Substantial State/Local Government Job Reduction Since Feb., Despite Monthly Increase

  • Nonfarm payrolls rose by 1.8 million, which is higher than the 1.5 million consensus forecast but well under last month’s 4.8 million increase.

  • The U.S. unemployment rate also improved to a better level than expected. It fell to 10.2%, down from last month’s 11.1%, which is better than the 10.6% survey expectation. An unemployment rate of 10.2% is still worse than at any point during the Great Recession.

  • The economy added 301,000 government jobs in July; 274,000 were state and local government and 27,000 were federal government positions.

  • A key fact is that state and local government employment is still 1.1 million below its Feb. 2020 level, confirming that state and local governments have been forced to cut payroll in order to balance budgets during the new COVID normal.

  • We expect more state and local government layoffs to occur if there is not federal aid. We also believe more layoffs could occur in the coming years as state and local governments continue to deal with revenue uncertainty, which could be potentially fueled by residential and commercial real estate market weakness.

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