After a stellar jobs report from the Bureau of Labor Statistics in April, May’s report proved lackluster, given the expectations.
Most notably, the number of jobs added to the economy in reality, 75,000, fell short of economists’ expectations of 185,000. It’s a disappointing metric, one that perhaps was influenced by the looming threat of a trade war. But although that’s the news grabbing the most headlines this morning, it’s worth considering a few positive fronts.
For starters, our seasonally adjusted unemployment rate remained at 3.6%, the lowest level in 50 years. The average annual hourly earnings increase was valued at 3.1%, just 0.1 percentage point shy of economists’ expectations. Given our persistently low inflation, this means that workers are continuing to see real gains in their paychecks for the first time in years. The average private sector paycheck now purchases 1.1% more than it could at this point last year.
And the amount of time going into each paycheck has also plateaued. The average American workweek is still 34.4 hours.
All in all, this report is suboptimal but not abysmal.
The big picture still matters here. On our 104th straight month of growth, we’re still in our longest bull market in American history. Investor confidence combined with economic growth and a tight labor market spell safety for the American economy — for now. If President Trump manages to keep the China chaos to a minimum and seal a border deal with Mexico, instituting excellent asylum reform and avoiding disastrous tariffs, he can likely ride out this economy to Election Day. But remember, at least four of our past 13 bull markets have been upended not by monetary policy or random credit crunches, but by political instability. Trump ought to remember that as he pursues trades talks.
Jerome Powell, the chairman of the Federal Reserve, has implied that he may bail Trump out if the trade war does start crunching the economy. Markets have already rallied at Powell’s hint that he may cut rates, but it remains to be seen if the Fed goes through with it.
Above all of this is a fundamental fact that every political partisan needs to remember regardless: we’re overdue for a recession. That we’re not already in one is an exception, not the historical rule.
