A Blockbuster Jobs Report — From Before the Delta Surge

By Yuval Rosenberg

Happy Friday! A big jobs report today
and a big weekend ahead, as the Senate prepares to vote on the
bipartisan infrastructure bill after what seems like months of
haggling. Wait, it has been months. But we're nearing the finish
line ... on the Senate side. Here’s what you need to
know.

U.S. Economy Added 943,000 Jobs in July, Before the Delta
Surge

U.S. employers added 943,000 jobs in July, the most since
last August, and the unemployment rate fell by half a percentage
point to 5.4%, a 16-month low, providing evidence that the economic
recovery from the coronavirus pandemic has some momentum — or at
least did before the recent surge in Covid-19 infections driven by
the spread of the Delta variant of the virus.

Friday’s report from the Labor Department was a
blockbuster. Not only did job gains surpass the roughly 870,000
expected by economists, but the previous two months’ gains were
revised to show 119,000 more jobs added.

“I’ve been doing this a long time — this is one of the
best monthly jobs reports that I’ve seen in my career arc,” Joe
Brusuelas, chief economist at the firm RSM, told
The Washington Post.

Private payrolls grew by 703,000 last month, while government
employment surged by 240,000, primarily in public school jobs.
Analysts at Goldman Sachs note that the end of the school year
produced fewer layoffs, with many staffers already out of work,
while The Wall Street Journal’s Eric Morath
reports that the gains likely reflect many schools
offering larger summer programs after a year disrupted by the
pandemic.

Overall, the labor force grew by about 261,000 last month,
raising the labor force participation rate by 0.1 percentage points
to 61.7%. Some two-thirds of newly hired workers last month came
off the sidelines of the labor market. And the number of workers
reporting being on temporary layoff fell by the most since last
October while the number of long-term unemployed dropped from to
3.4 million, down from 4 million in June. Average hourly earnings,
meanwhile, climbed by 0.4% from June and 4% year over year as
employers
continued to raise wages as they try to address
labor shortages.

“We saw a welcomed upward shift in July, and that’s a
significant handoff because the amount of government support is
decreasing,” Nela Richardson, economist at human-resources software
firm Automatic Data Processing, told The Wall Street Journal.
“Still there are concerns about whether the variants will stifle or
dampen the tremendous momentum we saw in early July.”

The surveys for the jobs report were conducted in the middle of
last month, before the resurgence in Covid cases had reached its
current levels and spurred new restrictions and a rethinking of
office-reopening plans in many places.

Biden warns of virus: President Joe Biden touted the job
gains as proof that his economic plan is working, but he also used
the report to urge more Americans to get vaccinated. “My message
today is not one of celebration. It’s one to remind us we got a lot
of hard work left to be done both to beat the Delta variant and to
continue our advance of economic recovery,” Biden said from the
White House. “This is a pandemic of the unvaccinated, so we have to
get more people vaccinated.”

Biden also said that Covid cases are still going to rise before
they come back down.

Forcing the Fed’s hand? The jobs gains in July could spur
the Federal Reserve to scale back its stimulus by reducing its $120
billion in monthly bond purchases. Analysts at Goldman Sachs said
that they now see a 25% chance of a formal tapering announcement in
November, up from 20% before, and a 55% chance of an announcement
in December. "We think the odds continue to rise that tapering
begins before the end of 2021," Conrad DeQuadros, senior economic
advisor at Brean Capital in New York, told
Reuters.

The bottom line: The economy has added 4.3 million jobs
this year, but employment levels remain 5.7 million jobs below the
February 2020 peak.

Number of the Day: 50%

Half of the U.S. population has now been fully vaccinated
against Covid-19, White House Data Director Cyrus Shahpar
said Friday. Shahpar added that the seven-day average of
new vaccinations is up 11% from last week and 44% over the past two
weeks. More than 58% of the U.S. population aged 12 and older has
been fully vaccinated, according to data from the Centers for
Disease Control and Prevention as of Thursday.

Infrastructure Weekend: Senate Set for Key Vote, Despite Clash
Over Crypto

The Senate is on the verge of handing President Joe Biden a
major victory by passing a $1 trillion bipartisan infrastructure
bill.

“It’s a bill that would end years of gridlock in Washington and
create millions of good-paying jobs, put America on a new path to
win the race for the economy in the 21st century,” Biden said
Friday.

After weeks of negotiations and wrangling — and some last-minute
hold-ups — Senate Majority Leader Chuck Schumer on Thursday set up
a critical procedural vote on the package for Saturday. Efforts to
speed the bill to passage Thursday collapsed as senators worked on
amendments and freshman Sen. Bill Hagerty (R-TN) refused to
expedite the process.

Hagerty said he objected because of a Congressional Budget
Office score of the bill showing that it will add $256 billion to
deficits over the next 10 years. “While we’ve heard for weeks that
[the infrastructure bill] would be paid for, it’s not,” Hagerty
said in a
statement, adding that he was especially concerned that
Democrats were looking to pass this bill so they could move on to a
$3.5 trillion budget resolution, which he called a “tax-and-spend
spree.”

But the CBO score did not appear to significantly weaken the
support from other Republicans, leaving the package on track to
pass eventually.

A clash over cryptocurrency rules: The $550 billion in
new spending in the infrastructure bill is financed in part by new
IRS reporting requirements for cryptocurrency brokers, which are
expected to raise $28 billion over 10 years. But Sen. Pat Toomey
(R-PA) and others have sought to narrow who would be subject to the
new reporting requirement, warning that the text as written could
have a “chilling effect” on the development of crypto mining and
software.

An amendment being pushed by Senate Finance Committee Chair Ron
Wyden (D-OR) and Sens. Toomey and Cynthia Lummis (R-WY) would
reportedly limit how the new rules would be applied, but the White
House pushed back on the proposal, saying Thursday that it prefers
a competing amendment from Sens. Rob Portman (R-OH), Mark Warner
(D-VA) and others. That measure would exempt more players in the
cryptocurrency world from the reporting requirement, but still
isn’t as broad as the proposal from Wyden, Toomey and Lummis. For
more details on the differences in the dueling plans and the issues
involved, see
The Washington Post or
CNBC.

The bottom line: The Saturday vote will require 60 votes
to advance, meaning that at least 10 Republicans will need to
support it. Senators could still push for additional amendments,
which would extend debate. But if the bill can avoid a filibuster,
it will be headed for passage, with a final vote coming as early as
Saturday afternoon or potentially being pushed into next week.

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