Blowout April hiring that leaves the U.S. the economic envy of the world, according to President Trump, comes with a spoiler: It makes the Federal Reserve interest-rate cut he has advocated via Twitter that much less likely.
The addition of 263,000 jobs to the country’s payrolls announced Friday, coupled with unemployment at a 50-year low, means the central bank will probably remain comfortable leaving rates alone, as it did after this week’s meeting, according to Wall Street economists and investors.
That status quo is unlikely to heal Trump’s rift with Fed Chairman Jerome Powell, who fell from favor less than a year after his 2018 appointment when the president blamed stock-market volatility on the central bank’s four rate hikes within a 12-month period.
Trump, who was told then that he lacked the power to fire Powell without cause, has alternately berated and pushed the Fed since December, noting before the monetary policy committee’s May meeting that the U.S. economic growth buoying his reelection bid would be even stronger if the central bank would only lower interest rates.
Despite the president’s pressing the point, a departure from White House practice of the past several decades, the idea is likely off the table for now, Doug Clark, chief portfolio strategist at Prime Advisors, told the Washington Examiner.
“There’s no reason for them to cut rates right now, with the stock market doing very well, corporate borrowing rates being very favorable and the employment growth that we’re seeing,” he added.
We can all agree that AMERICA is now #1. We are the ENVY of the WORLD — and the best is yet to come! pic.twitter.com/Uc81DzHbu2
— Donald J. Trump (@realDonaldTrump) May 3, 2019
Rather than bending the Fed to his will, Trump may accomplish the opposite, with policymakers digging in their heels to maintain an independence creators tried to build into its structure.
“The rhetoric coming out of the White House, I don’t think, is going to be the driving force for them to change their minds,” Clark said. Powell himself underscored the central bank’s focus on maintaining stable growth and maximum employment free from partisan concerns earlier in the week.
“We are a nonpolitical institution, and that means we don’t think about short-term political considerations,” he told reporters after the monetary policy committee meeting on Wednesday. “We don’t discuss them. We don’t consider them in making our discussions one way or the other.”
If a rate cut isn’t on the table, however, Trump can take comfort from the fact that a rate increase doesn’t appear to be either.
Powell described the central bank as content with rates at 2.25% to 2.5%, and April’s labor market presents a Goldilocks scenario that may preserve that, Joseph Song, an economist with Bank of America, told the Washington Examiner.
“You’ve got job growth that suggests the economic is expanding at a decent pace,” Song said, “and they don’t have to get tough on markets because inflation pressure remains limited.” Hourly wage growth, an inflation indicator, was 3.2% in April, a pullback from February’s high of 3.4%.
Overall, the numbers show Trump’s economic policies, such as cutting taxes for business and loosening regulation, are working, White House economic adviser Larry Kudlow said on Fox Business Network’s “Varney & Co.” on Friday.
A poll by rival network CNN, released Thursday, shows 56% of Americans approve of Trump’s handling of the economy, a clear edge as the 2020 election draws nearer and the field of Democratic candidates thickens.
“He is rebuilding this economy,” Kudlow said. “This is a very, very good story, good growth, low inflation and I would say this, to echo the president who periodically says this, I think we can do even better.”
