Why the July jobs report is 'vital': Economist

Nick Bunker, Indeed for North America's Director of Economic Research, joins Yahoo Finance’s Zack Guzman to break down his expectations for the July jobs report out tomorrow.

Video Transcript

ZACK GUZMAN: Of course, investors have been digesting the latest update we got this morning on the unemployment front. Initial jobless claims coming in there at 1.186 million versus the 1.4 million expected. It's the latest update we'll get before the big July jobs report number tomorrow morning. But it does point to kind of this faltering here, as it's the 20th straight week that we've seen unemployment claims come in above 1 million.

Joining us now for more on what the employment picture might look like here and the update we might get tomorrow is Nick Bunker, Indeed for North America director of economic research. And, Nick, it's good to see you again. But, I mean, when we think about breaking all this down, what's your take on how the recovery might be faltering a bit now, especially when you bring in what you guys are seeing on the hiring front and rehiring front as people think this recovery might be a bit shaky.

NICK BUNKER: Yeah, the last few months, these jobs reports have been incredibly important. But tomorrow seems incredibly vital. There's high uncertainty about how many jobs were added in the month of July. There are some estimates in the middle around 1.5 million, but we've got some negative estimates and some higher estimates, because a lot of the real time indicators of the labor market are themselves all over the place. On Indeed, we're seeing the trend in job posting continue to pick up, but it's still about 18% below its trend at this point last year. Other indicators, though, are pointing to a sideways move in employment or even a decline.

ZACK GUZMAN: Yeah, I would stress that 18% decline in terms of job postings versus last year, just because when we think about this v-shaped recovery and all of what goes into that and from people who were expecting this huge snapback in terms of rehiring-- if you see that, I mean, it doesn't really speak to that at all. So what do you make of that in terms of whether it's weakness on those hardest hit industries-- we know what retail has been going through, we know what restaurants have been going through. But that had been really-- a lot of the jobs we saw came back at least over the last few months. But what about the other sectors there and the weakness tied to those as well?

NICK BUNKER: So I think you're right to point out the level there, that we're still 18% below last year's trend. I think it's also important to notice that there are some occupations or job types on our site that really haven't seen any sort of bounceback. And those are primarily higher-paying jobs-- so banking and finance, lots of technology roles. The demand for those postings really hasn't picked up. Now, mind you, those are the jobs where employment has held up better. But any sort of forward-looking demand for those roles really hasn't picked up much, especially compared to the overall labor market.

ZACK GUZMAN: Yeah, I mean, when we think about the-- we're going to get the unemployment number as well here, but we've noted at the top of the show, a lot of states are still seeing some shockingly high ensured unemployment rate. That would be the number of people who are on unemployment benefits divided by the labor force-- and Nevada close to about 27% there, and some other states worth noting. But I mean, when we think about why that means that the unemployment benefits that we saw roll off at the end of July are so important is because you've got so many Americans depending on that extra benefit. And you guys noted as well-- I mean, in June, that $600 add-on was 5.2% of all disposable income. So when you put that into context when you think about how important those benefits are to millions of Americans who don't have a job anymore.

NICK BUNKER: Exactly. And that 5.2% is aggregate household income. So you can only imagine what a large percent of income that's going to be for the workers on these programs. And to your point about these very high elevated levels of initial claims-- that suggests that there's still some job loss happening in the labor market. And most of those separations are likely to be permanent, unlike lots of the temporary layoffs we saw earlier in the crisis. The more and more of the folks who are getting on that unemployment insurance program are likely to be there for a longer period of time than many people would have hoped in the beginning of this crisis.

ZACK GUZMAN: Yeah, there's so many different ways-- I mean, if you've watched this show, you know there's a lot of different ways-- we've discussed this ways-- you can break down the impact that we're seeing be felt right now, whether it's unemployment rate across races or if it's sectors or what have you. But when you look at regionally all of this playing out, you guys broke out kind of data in terms of job losses tied to Republican-leaning communities versus Democrat-leaning leaning communities. What did you see on that front and what it might kind of say about where we're seeing job losses stack up?

NICK BUNKER: So what we've seen is that the trend in job postings in metro areas that voted Republican in 2016, their trend's picking up more compared to the Democratic-leaning areas. That's likely to do with the composition of the kinds of postings in those metro areas. Metros that go Democratic tend to have a higher share of work from home jobs. They tend to have more technology jobs. And those are the kinds of industries we're seeing weakness and overall declines [INAUDIBLE] job postings.

ZACK GUZMAN: Job postings, a little bit of a clarification there. But lastly before we let you go, you know I always hold your feet to the fire when we think about what to expect when the big jobs number comes through here. I won't hold your feet that close to the fire, but if you had to tease out maybe one or two data points that would indicate whether or not we're expecting a beat or miss here-- in your mind, what becomes most important in trying to predict what we'll see tomorrow?

NICK BUNKER: I think one indicator that's new and experimental but actually did a decent job of predicting the change in employment between-- for the June report was the household pulse survey from the census. And what we're seeing in that data is actually a decline in employment. Now, with all those caveats, it's new and experimental. I think that is one piece of evidence to suggest maybe we should be a little more prepared for some negative numbers tomorrow.

ZACK GUZMAN: Yeah, and we've heard that from a few economists that have come on the show as well, pointing out that pulse survey has indicated a little bit more weakness than what we should expect going into all this. But, Nick Bunker, Indeed for North America director of economic research. As always, appreciate you coming on, man.

NICK BUNKER: Thanks for having me.