Every analysis of the economy ought to be prefaced by the fact that underlying asset bubbles may be threatening an economy that’s already overdue for a recession.
But that being said, April’s Bureau of Labor Statistics report couldn’t possibly spell better news for the American economy. Employers created 263,000 jobs last month, some 40% higher than what economists surveyed by the Wall Street Journal had anticipated. Our seasonally adjusted employment rate plummeted to 3.6%, a level not achieved since 1969.
Most astounding is the nation’s wage growth. Average hourly earnings have increased by 3.2% over the year. Ordinarily, this would be fair enough news, but it’s exceptional considering our inflation rate, which has consistently hovered in between 1.5% and 1.9% this year. Low inflation given fairly dovish monetary policy plus job and wage growth is the absolute sweet spot not just for investors, but the economy as a whole.
While consumer buying power of most Americans has vastly increased due to technological advancement, their real wages have largely over the long run flatlined, due to both periods of weak growth and high inflation. Some way, somehow, we’ve found our balance on the untenable tightrope of a hot economy unencumbered by inflationary burden.
Industry growth continues to reflect automation’s bias towards the service economy, with the greatest employment gains made in administrative and support service, healthcare, social assistance, specialty construction contractors, and computer services.
The only dismaying figure from the BLS, as it always tend to be, came with labor force statistic. While our unemployment’s at its lowest rate in half a century, our labor participation rate still hasn’t returned to the high 60s of the late 90s and early aughts. At 62.8%, it unfortunately fell by 0.2 percentage points. The most important figure, however, at least shows promise: the number of people not in the labor force that do want a job has fallen by nearly 60,000 in the past year.
With a quarter of a million jobs added to one of the tightest jobs markets during the longest bull market in history, the American economy is already great. Federal Reserve Chairman Jerome Powell seems unlikely to either raise rates or cower to President Trump’s demands that he cuts them. But Trump needn’t worry. With figures like these, we just need to tie up loose trade ends with China and our neighbors and stay the course. Whatever the economy’s doing, it’s working.
