July jobs report weak: Economy sheds 51,000 jobs, unemployment rate rises to 5.7%

We just got the employment report for the month of July. The numbers were somewhat better than Wall Street was expecting on the headline. But they look pretty weak once you dig into the details. Let's do so now ...

* The economy shed 51,000 jobs overall in July. That was the same as in June (which was revised slightly better to -51,000 from -62,000) and better than the average forecast for a loss of 75,000 jobs. Average hourly earnings were up 0.3%, the same as the past two months. But average weekly hours worked slipped to 33.6, down from 33.7 and the weakest reading since November 2004.

* At the same time, the unemployment rate spiked from 5.5% in June to 5.7% in July. That's the highest the unemployment rate has been since March 2004 (5.8%).

* The manufacturing industry shed another 35,000 jobs in July (unchanged from June), while the construction industry lost 22,000 jobs (vs. -49,000 in June). The service sector weakened, with trade and transport losing 39,000 jobs (vs. -15,000 in June), retail losing 17,000 jobs (vs. -6,000 in June), and information technology shedding 13,000 (vs. -6,000 in June). The only relative strength was in education and health care (+39,000) and government (+25,000).

* The diffusion index, which measures the percentage of industries shedding workers against the percentage adding them, weakened. It slipped to 41.2 from 42.2 a month earlier. That's the worst reading since August 2003.

All in all, it's mildly bad news, but not atrociously bad. The market reaction is somewhat muted at this time. Long bond futures were recently up 4/32 in price ... the dollar index is up marginally after the number (+23 bps) ... while stock futures have rallied slightly (+3.5 on the S&P futures) as I write.