On Friday, August 7, 2026, the Bureau of Labor Statistics (BLS) released “The Employment Situation – July 2026.” (1) While it wasn’t completely dreadful, it wasn’t a good report. In fact, the only silver lining I think most everyone might agree upon is that it could have been worse.
According to the BLS, the economy lost 23,000 net payroll jobs during July. The private sector added 30,000, and the public sector cut 53,000. Interestingly enough, the official unemployment rate fell to 4.1% from 4.2%. However, that was almost entirely due to an estimated 381,000 folks dropping out of the workforce.
You see, generally speaking, if you aren’t actively looking for work, you aren’t counted as unemployed. In fact, we could theoretically have an economy where no one had a job, and the unemployment rate was 0.0%. If that is hard to imagine, think of, say, an assisted-living facility. How many people living there are actively participating in the workforce? Very few to none?
If so, care to guess what the unemployment rate there is? Still, politicians don’t currently brag about the small number of unemployed at retirement homes. However, I suspect it is only a matter of time before they start.
This is important, because our economy depends on folks spending money. Shoot, every economy does. So, when we create jobs, we create paychecks. When this happens, the economy creates additional income for consumers. All other things being equal, more income and spending capacity are generally supportive of economic growth.
So, an employment report which suggests an overall payroll deduction and fewer people actively looking for work? That ordinarily wouldn’t bode well for economic growth in the immediate future. Or so it would seem.
However, economic growth is not merely a function of adding more workers. That is only part of it. These workers have to create new products and services, which encourage people to spend even more money.
To illustrate the distinction between the size of an economy and individual prosperity, how would you answer the following: Which is the wealthier country, Iceland or Ethiopia?
I doubt anyone answered Ethiopia despite the fact that it has far more people and a larger economy. According to the International Monetary Fund (IMF), the nominal size of Ethiopia’s Gross Domestic Product (GDP) is around $122.7 billion. By comparison, Iceland, a charming island country of less than 400K souls, has an estimated GDP of roughly $43.8 billion. (2)
So, while the sheer number of jobs is important, the type of job is also. Does it add to the overall productivity and capacity of the economy? Does it improve the general standard of living? Does it, let’s call it, ‘advance the ball?’
This is why countries, economies, have to continually reinvent themselves in order to expand. They have to continually create new products and services in order to improve the general standard of living. You can think of it as constant ‘creative destruction.’
With this in mind, think about the industrialization of the United States. How ‘we’ were once the workshop for the world. The vaunted arsenal of democracy, when the sheer might of our manufacturing sector was arguably a bigger factor in winning The Second World War than the brilliance of our generals.
Folks from both sides of the political aisle seem to wax nostalgic about a time in our nation’s history when ‘high-paying’ blue-collar jobs could support a family of four. When our country didn’t amass such enormous trade deficits, and when we just made stuff. At least it seems that way to me, or perhaps I should quit social media altogether and find better news outlets.
So, if we can assume those truly were halcyon days, back when America was really at the top of its game, let me ask yet more questions: do you want to work on the floor of a paper mill? Down in a coal mine? Do you really want your children or grandchildren to do so?
Don’t get me wrong, driving through former mill towns or even brownfield areas in the Birmingham, Alabama metro area is depressing. Why did we let this happen? All those jobs lost, you know. Jobs that supported families, and all of it. Now look at those neighborhoods! Falling down on themselves. That is what happens! Economic destruction when you don’t protect your people!
Right?
Perhaps. Or you could think of it another way. Once the jobs were gone, workers with get-up-and-go actually got up and left. They put the old life behind them and went to find a new one. They developed new skills. They broke the cycle which had kept them pinned down and hanging around.
I have seen it with my own eyes here in the Birmingham area, as the local economy has evolved from base manufacturing to financial services to medicine to an increasingly diversified workforce. There are sections of town which look almost dystopian due to the closing of various production facilities and the emptying of the local housing.
But get this. In 1971, the year in which my family moved here, the ‘personal income per capita’ in the Birmingham metro area (BMSA) was $3,757. (3) This was about 84.6% of the national average of $4,491 for that year.(4) Fast forward to 2023, after a fair amount of economic dislocation and transformation, and the ‘personal income per capita’ in the BMSA is 100.4% of the national average, $66,509 locally relative to $66,259 nationally.
Now, if you had told just about anyone in 1970 that the BMSA would be better off economically, by this measure, after a significant decline in the local manufacturing sector, they most likely wouldn’t have believed you.(5) More so, and I have no way of knowing, they might have even argued that Birmingham needed even more manufacturing, certainly not less. While the sector is still important, it is just a part of the local economic picture.
Of course, this would be an excellent topic for a graduate degree thesis, and I am sure there are any number of scholarly articles from which to cite. However, I have witnessed it, history and economic transformation, with my own two eyes. I remember not being allowed to go outside for recess because the air was too unhealthy. I remember driving through western Jefferson County and seeing factories bellowing flames and filth into the air. I remember the public angst when the steel companies started letting folks go.
However, I strongly suspect most people would agree BMSA is a nicer place to live now than it was then. Of course, things could always be better, and no one likes empty buildings and disenfranchised neighborhoods. Still, when push comes to shove, as I have suggested with the per capita income numbers, Birmingham appears to have a stronger economy by this measure and a higher standard of living by a number of measures following decades of economic transformation.
That pretty much sums it up for job creation, in general. As the famous saying goes: “if you always do what you’ve always done, you’ll always get what you’ve always got.” While any job is a good job and any job creation is better than the alternative, new jobs and job creation which transform the economy are preferable to ‘more of the same.’
Ideas that have the potential to change our lives and how we conduct business can be scary. However, economic growth often requires some degree of innovation and change.
To that end, the most recent labor market report wasn’t a good one. In July 2026, the economy apparently lost some jobs. That is short-term bad news, more for the person losing the position than for the economy as a whole. After all, my experience suggests economic change can result in job losses, even as it creates opportunities elsewhere. Over time, that transformation can sometimes lead to stronger economic outcomes.
So, a bad monthly report? I don’t love it, but I also don’t necessarily sweat it. It happens. Let’s just hope some of those folks who are no longer in the workforce, either voluntarily or involuntarily, start working on the next big thing.
Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this and every day. Also, please be sure to tune into our podcast, Trading Perspectives, which is available on every platform.
John Norris
Chief Economist
SOURCES
- Bureau of Labor Statistics – The Employment Situation – July 2026.
- International Monetary Fund – GDP, Current Prices. Accessed August 7, 2026.
- Federal Reserve Bank of St. Louis – Per Capita Personal Income in Birmingham, AL (MSA). Accessed August 7, 2026.
- Federal Reserve Bank of St. Louis – Personal Income Per Capita. Accessed August 7, 2026.
- Federal Reserve Bank of St. Louis – Birmingham Economic Data Series. Accessed August 7, 2026.
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