Shockingly Bad Jobs Report Raises Concerns About Labor Market

Sen. Ron Johnson and his colleagues are trying to head for the exits. (Reuters)
Reuters
By Yuval Rosenberg and Michael Rainey

Happy Friday! Or maybe not so happy, given the shockingly weak July jobs report out this morning, which added to questions about the state of the economy. We've got details on that below, but first we've got updates about a court ruling on President Trump's White House ballroom project and the Senate's scramble to finish some agenda items as it hopes to start a five-week summer recess.

Senate Unveils Budget Resolution as It Looks to Power Toward Five-Week Recess

The Senate held a series of votes today as it tries to wrap up or at least make progress on some key items before taking a summer break, but the chamber's push to tackle a lengthy to-do list before heading out has run into some snags as lawmakers clash over a college sports bill and a time agreement needed to speed up the legislative process before the Senate adjourns.

As part of the chamber's push to tackle its to-do list, Senate Budget Committee Chair Ron Johnson released a budget resolution needed to unlock the GOP's third reconciliation bill. The blueprint technically allows up to $150 billion in deficit increases, including $60 billion in supplemental military funding for the Iran war, another $13 billion for intelligence programs and $12 billion in farm aid. The resolution also would greenlight another $20 billion for election-related programs overseen by the Committee on Rules and Administration, $20 billion for the Judiciary Committee, and $1 billion each for the Commerce, Energy, Foreign Relations, Indian Affairs and Veterans Affairs committees.

In all, the budget framework contains instructions for 11 committees, which also means that Democrats would be able to bring up amendment votes on a broad range of politically sensitive topics during a "vote-a-rama" that would be required as part of the complex reconciliation process that Republicans are using to bypass the threat of a filibuster.

"In less partisan times, the requested appropriation supplemental for these priorities would have sailed through Congress with bipartisan support," Johnson, a Wisconsin Republican, said in a statement. "Instead, because of Democrat obstructionism, we are having to resort to the budget reconciliation process. This resolution would fund the bare minimum of what is required for the defense of our nation, and I urge my colleagues to fully support it."

The budget blueprint passed by the House last month approved up to $95 billion in new spending, but both chambers must adopt the same resolution to unlock the reconciliation process.

The Senate is expected to vote on its framework before departing for its recess, but the plan is expected to come up short of the 50 votes needed to advance. Republican leaders reportedly decided to hold the vote because a GOP senator was set to force one anyway.

Adjourning for the rest of August? The Senate's plans got bogged down Friday as Republicans struggled to figure out a path forward on a college sports bill, and GOP Sen. Mike Lee objected to a plan to take up a series of votes, including on a government funding stopgap and confirmation of Todd Blanche as attorney general, and then adjourn. Republican Sen. Bill Cassidy announced today that he would provide the final vote needed for Blanche to get the nation's top law enforcement job.

Earlier in the day, senators voted 86-11 to approve a Russia sanctions bill championed by and named for the late Sen. Lindsey Graham.

They also voted 51-47 to confirm a package of 74 nominations and 91-6 to advance a stopgap bill to fund the government until December 11.

The bottom line: The Senate drama will play out tonight and possibly into the weekend. We'll be back on Monday with an update.

Federal Appeals Court Deals a Blow to Trump's Ballroom Project

A federal appeals court on Friday ruled that the construction of President Trump's controversial White House ballroom is likely unlawful and said that the project can't proceed without explicit congressional approval.

"We are aware of no instance in American history in which a President unilaterally and using privately collected funds demolished substantial portions of the White House that Congress authorized to be built and American taxpayers paid for. Until now," the U.S. Court of Appeals for the District of Columbia Circuit said in a split decision by a three-judge panel. "Whether or not a massive ballroom should be constructed is for Congress to decide and is not a matter for Executive self-help."

The ruling by Judges Patricia Millett and Brad Garcia upheld an earlier judge's injunction halting construction on certain work at the White House site but paused its order for 14 days to allow the Trump administration to appeal to the Supreme Court.

The decision drew a lengthy social media screed from President Trump, who framed the issue in terms of national security and vowed he would appeal immediately.

Trump blamed the two judges appointed by Presidents Obama and Biden for what he called a "horrendous, politically motivated, and unlawful ruling." (Trump-appointed Judge Neomi Rao dissented.)

In his post, the president also referred to the project, including a new 90,000-square-foot ballroom estimated to cost $600 million, as a military center necessary for national security. The White House in June redirected more than $350 million in funds for the Secret Service to security measures at the White House, which reportedly was meant to help pay for the project, which Trump had insisted would not involve taxpayer money.

"It is all tied together as one big, expensive, and very complex unit, which is vital for National Security and Military Operations of the United States of America!" Trump wrote Friday. He argued that the court ruling downplays the security risks involved in leaving an open construction site at the White House and "severely jeopardizes the lives and welfare" of people who work there.

The court addressed such security concerns by noting that the preliminary injunction halting construction offers protection. That halt applies only to certain work above ground, not to security features or the below-ground construction of bunkers, bomb shelters or military and medical infrastructure. Judge Richard J. Leon of the U.S. District Court for the District of Columbia, who issued the earlier halt on the ballroom project, wrote in his April decision that "national security is not a blank check to proceed with otherwise unlawful activity." He also wrote that concerns about leaving a large hole on the White House grounds were "a problem of the President's own making!"

Brent Leggs, the president and CEO of the National Trust for Historic Preservation, which brought the legal challenge to the construction project, celebrated the court order: "This is a great day for our country and for the American people's right to voice their opinions about the historic places they cherish, including the White House," he said. "From the beginning, our position has been clear and consistent: the law states that only Congress can authorize the construction of a ballroom at the White House."

The bottom line: Work on the White House site appears likely to continue at least until the Supreme Court decides the fate of the project - the latest legal fight the high court has had to adjudicate over executive power during the Trump presidency.

Quote of the Day: Trump's Take on Voters

"They're not angry at me. But they are angry at Republicans."

  • President Trump, discussing voter feelings in an interview with Punchbowl News that was released on Friday.

Trump said he was concerned that voters might not turn out in November's elections because he's not on the ballot. "The question is, will they vote? Because a lot of them are very angry at Republicans, to be honest with you," Trump said.

Asked why that is, Trump said he doesn't know but insisted that voters aren't angry at him.

Trump's approval ratings have slumped, falling to 34% in a recent CNN poll amid rising prices and his war with Iran, with a record 73% in the CNN poll saying that Trump "hasn't paid enough attention to the country's most important problems."

Shockingly Bad Jobs Report Raises Concerns About Labor Market

U.S. employers reduced payrolls by 23,000 in July, the Labor Department reported Friday. The net loss came as a surprise, with analysts expecting to see an increase of roughly 85,000 for the month. Job growth in previous months was revised lower, as well, reducing the tally for May and June by a combined 103,000.

At the same time, the unemployment rate fell from 4.2% to 4.1%. The reason for the decline, though, was people dropping out of the labor market rather than finding jobs - something economists refer to as unemployment falling "for the wrong reason." Over the last two months, the labor force has declined by nearly a million workers, and the labor force participation rate has fallen to 61.4%, the lowest since the 1970s outside the pandemic.

Employment in local government education dropped by 50,000, likely driven by summertime teacher layoffs, pulling the net jobs number into negative territory. But private hiring was weak, as well, with a net gain of just 30,000. Healthcare employment rose by 22,000, construction firms added 22,000 jobs and manufacturers hired 5,000 workers. Retail shed 19,000 jobs, while leisure and hospitality employment fell by 40,000.

Average hourly wages were little changed in July and were up 3.2% over the last 12 months - the slowest annual pace in almost five years, and below the annual inflation rate.

What the analysts are saying: Overall, the jobs report suggests that the labor market has been weakening.

"We can't really put lipstick on a pig here,'' Daniel Zhao, chief economist at the employment website Glassdoor, told the Associated Press. "This is not a great report for July.''

University of Michigan economist Justin Wolfers noted that the labor market has created 200,000 fewer jobs over the last three months than expected, writing on social media that "July's new number is downright concerning."

The decline in employment among immigrants is playing a role, said Bill Adams, chief U.S. economist at Fifth Third Commercial Bank. "While the unemployment rate is falling, that is mostly for the wrong reason-not enough workers," he said, per CNBC. "Immigration compensated for the aging of the workforce in the first few years of the post-pandemic expansion, but that's not happening anymore."

The Trump administration's take: National Economic Council Director Kevin Hassett blamed the poor July numbers largely on a quirk of the weather and the calendar, arguing that a snowy winter extended the school year, pushing annual teacher layoffs into July. He also cited the end of the World Cup as an important factor affecting leisure and hospitality employment, and mass deportations carried out by the Trump administration as a factor lowering hiring levels.

Hassett told Fox News that if you ignore the sectors that lost jobs, the economy actually added jobs.

Navy Federal Credit Union Chief Economist Heather Long had a more pessimistic interpretation, arguing that recent jobs data indicates that the labor market is stalling. "The strong jobs reports earlier this year have now faded," Long said on social media. "A 'no hire' job market is one with few opportunities and little dynamism."

Complicating the picture: The jobs report complicates the picture for the Federal Reserve, which is facing pressure to raise interest rates in the face of persistent inflation. A weaker labor market makes that choice more difficult, since raising rates typically acts as a burden on employers.

"This morning's report is a game changer in the sense that all of the recent focus has been on inflation and this report highlights the risks that are embedded in the labor market as well," said Chris Zaccarelli, chief investment officer for Northlight Asset Management, per CNBC. "Before today, many were expecting that the Fed had no choice but to raise rates in order to fight stubbornly high inflation, because the job market was so strong, but this report shows that isn't the case."

Where bad news is good news: Stocks rose Friday as investors bet that the dismal jobs report would lead the Fed to hold off on interest rate hikes. The S&P 500 closed at a record high of 7,757.64.

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