The jobs report and new fiscal stimulus makes the Fed’s job more difficult.

The labor market report for July was a huge surprise with some conflicting data. The corporate survey reported growth of jobs of 528,000, more than double expectations. The unemployment rate dropped to 3.5%, a fifty-year low. On the surface this report reflects a strong jobs market that has rebounded from lower growth in the prior two months. The household survey which is used to calculate the unemployment rate told a different story. Those reporting as working only increased by 179,000 and the labor force declined by 63,000 causing the unemployment rate to decline. The gap between job growth in these two surveys widened to record levels. Part of the problem is differences in the survey and seasonal adjustment factors.