On the July Jobs Report

A big beat in payrolls, all the more so on the back of large upward revisions to prior months. It’s confirmed by an even larger jump in employment measured by the “household survey.” It is a large upside outlier versus other contemporaneous labor market data. This is the first jobs report to reflect 26 states opting out from federal top-ups to unemployment benefits. We don’t have state-level data to prove that yet. But July is the first month in which net new payrolls came close to matching the number of workers who said they are no longer barred from working due to Covid-related business closures. This will activate talk about Fed tapering. We don’t think it matters one way or the other at this point. But in the previous business cycle recovery, with payrolls closer than now to reattaining their pre-recession peak, the Fed launched QE3. Powell is up for reappointment, and we suspect he is in no hurry to take any steam out of the economic recovery presided over by the administration that will make the call.