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August 2018 Jobs Report: Bounceback

Solid expansion, solid wage growth …

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After a disappointing print in July, the American employment situation bounced back in August.  According to data from the U.S. Bureau of Labor Statistics (BLS), the U.S. economy created 201,000 new positions last month – above the 190,000 new jobs analysts were expecting to see and well above the downwardly revised 147,000 new jobs created the previous month.

Meanwhile job growth from June was also revised downward to 208,000 new positions.

All told, revisions from June and July saw a net decline of 50,000 jobs.

Still, the report was generally good.  And it could wind up getting even better as more complete data becomes available.

“August has a history of upward revisions, so this number is likely to be even stronger,” noted Tim Mahedy of Bloomberg.  “Over the past five years, August payrolls have been revised up by an average of 51,000 relative to the first print.”

Perhaps the best news?  An uptick in wages.

Average hourly earnings grew by 0.4 percent month-over-month – twice what analysts were expecting.  For the year, they are up 2.9 percent – the highest print since 2009.

“This morning’s employment report continues to perpetuate the long-standing notion of solid job creation and while improving, still-modest wage growth,” said Lindsey Piegza, chief economist for Stifel Fixed Income.  “At this point, nine years into the recovery, the jobs market remains far from robust, nevertheless steady job market conditions, coupled with now rising inflation should be enough to justify a further removal of accommodation.”

In other words, expect the Federal Reserve to move forward with another round of interest rate hikes in the months to come.

Supporters of U.S. president Donald Trump don’t want that to happen, though.  In fact one of Trump’s staunchest defenders – Rick Manning of Americans for Limited Government (GetLiberty.org) – cited disappointing date on the labor participation front as evidence that the Federal Reserve should leave interest rates alone.

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The number of Americans not participating in the labor force soared by 692,000 in August – causing the labor participation rate to dip 0.2 percent to 62.7 percent.

“President Trump is not going to be judged on the traditional unemployment rate,” Manning said.  “He is going to be judged by the amount of people who are being brought back into the economy who had been left behind.  To say that this jobs report is troubling would be an understatement, however, as it eviscerates many of the gains that have been made with new people in the workforce and the amount of people working.”

“We strongly hope that this is an anomaly owed to the summer ending and many part-time employees and students heading back to school,” Manning added.  “The Federal Reserve should be very cautious before raising interest rates any more until we discover whether this report is the beginning of a trend or a temporary bump in the road.”

This news site continues to be concerned that economic activity is not living up to its full potential in the aftermath of the Great Recession.

As we have pointed out ad nauseam, we believe Trump’s failure to rein in spending in Washington, D.C. (here and here) and his failure to insist upon a larger tax cut (one targeting more relief to middle income earners) represent major impediments to sustained economic robustness.

America’s economy hasn’t expanded at a three percent rate in more than a dozen years.  It hasn’t eclipsed the four percent threshold since 2000 – former U.S. president Bill Clinton’s final year in office.  By contrast, growth exceeded five percent in twelve out of thirty years from 1950-1980.  And it exceeded four percent in seventeen out of those thirty years.

Meanwhile labor participation continues to be stuck in a rut- remaining at or below 63 percent for the past four-and-a-half years.

Clearly the era of obscenely big government – championed for divergent purposes by Democrats and “Republicans” in Washington, D.C. over the past two decades – has demonstrably failed to improve economic outcomes in our nation.

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