July Jobs: After Another Strong Employment Report, What Does the US Economy Really Need Right Now?

 

Good stuff! The US economy generated 209,000 jobs last month. That’s a bit stronger than analyst expectations and above the average monthly jobs gains so far this year.

Think of it this way: The current expansion is the third-longest ever with 82-straight months of job growth. And while job growth is slowly easing back — at 179,000, the average monthly gain over the past six months is slightly weaker than 2016’s 187,000 average — it’s still on a 2-million-a-year pace. Not bad at all.

More good news: Both the employment and participation rates ticked higher, yet the official jobless rate slipped back to 4.3%. Average earnings rose by 0.3% on the month, though they are still only 2.5% higher than a year earlier. But with inflation low, there still seems to be plenty of buying power when you add in hours worked. “Moreover, there is early evidence that wage gains may have accelerated a little over the past five months,” note IHS Markit.

Here’s the Wall Street take from Barclays bank:

Employment gains remain solid and have slowed little despite the beginnings of Fed policy normalization. It has been our long-held view that employment gains would remain sufficient to keep the unemployment rate in a downward trend, as has been the case in prior expansions. … The rise in participation prevented a larger unemployment rate decline. … We continue to forecast that the participation rate will largely move sideways and further growth in employment should push the unemployment rate below 4.0% next year, if not sooner. … Economy-wide income growth remains healthy. The payroll proxy, which is the combination of total hours worked and average hourly earnings, is up 5.8% in Q3 over the Q2 average and continues to run well above the pace observed in Q1 (2.4%). Hence, the income implications of today’s report leave us comfortable with our outlook for 2.5% GDP growth in Q3.

(Politics junkies might want to note the above bit in bold.)

​So what does the US economy need right now? Probably nothing that smacks of fiscal stimulus — say deficit-worsening, temporary tax cuts — although I might move slower than the Fed to raise rates. Policymakers should be thinking long-term, thinking about deep structural reform. What sorts of tax, regulatory, spending, trade, and immigration policies are best for sustained growth that benefits folks up and down the income ladder? And I as write in my new The Week column, Silicon Valley may be ready to give this economy a powerful tailwind though greater innovation-driven productivity growth.

Published in Economics
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  1. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    What if President Trump could wave a magic wand and say, “Ok, I hereby give all companies smaller than 100 Billion in sales a 20% increase in Profits from now on! Go out and make your companies stronger, expand, and hire more people!”

    That’s why I think Congress should give him a Corporate Tax rate decrease from 38% to 15%. Just think what struggling companies could do with that money!

    Don’t get all math-y on me and explain how it would be exactly 20% or whatever. You know what I am talking about.

    • #1
  2. J Climacus Member
    J Climacus
    @JClimacus

    I suppose it’s good stuff if you are interested in being a bartender, waitress or chambermaid in a nursing home – by far the biggest gains were made in leisure and hospitality and healthcare. And if you are interested in part time work rather than full-time employment. Part time employment rose by 393,000 while full-time employment actually fell by 54,000. So if you lost your engineering job and are now holding down two bartender jobs trying to make ends meet, congratulations! You just increased the job count.

     

    • #2
  3. Chris Campion Coolidge
    Chris Campion
    @ChrisCampion

    The job count number itself is meaningless without looking at the mix of jobs.  The Barry Administration ™, spent 8 years or so touting the raw count when it was up, then looking sideways when it was mediocre, but never addressed the fact that income growth was stagnant or under the inflation rate (something also walked past in the OP), and the growth in jobs was largest in the lowest levels of income, and education.

    Take a look at this chart.  Hires and Job openings.  The highest numbers in hiring and openings are mostly for entry-level stuff, retail, or social services.

    https://www.bls.gov/opub/ted/2017/job-openings-and-hires-rates-by-industry-march-2017.htm

    • #3
  4. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    Chris Campion (View Comment):
    The job count number itself is meaningless without looking at the mix of jobs. The Barry Administration ™, spent 8 years or so touting the raw count when it was up, then looking sideways when it was mediocre, but never addressed the fact that income growth was stagnant or under the inflation rate (something also walked past in the OP), and the growth in jobs was largest in the lowest levels of income, and education.

    Take a look at this chart. Hires and Job openings. The highest numbers in hiring and openings are mostly for entry-level stuff, retail, or social services.

    https://www.bls.gov/opub/ted/2017/job-openings-and-hires-rates-by-industry-march-2017.htm

    Right. As companies expand, they hire entry-level folks who will grow with the company. That would be Twilight Zone stuff if most of the hiring was Executives. “Company XYZ is proud to announce that because of our expansion, we’ve hired 1,000 new Vice Presidents.”

    Heh heh, I crack me up.

    • #4
  5. Sisyphus Member
    Sisyphus
    @Sisyphus

    It would be interesting to slice the data by age groups. An awful lot of bungling Barry’s victims were managers and skilled workers approaching or in their fifties.

    • #5
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