A Sigh of Jobs Relief Workers continue to gain, despite damage from trade policy.
https://www.wsj.com/articles/a-sigh-of-jobs-relief-11570228132
Imagine how well the U.S. economy would be doing with better trade policy. That’s our reaction to Friday’s jobs report for September that showed remarkable resilience despite the headwinds of tariffs, declining business investment and a manufacturing downturn.
The economy created 136,000 new jobs in the month, plus 45,000 more in upward revisions for July and August. That adds up to a monthly average so far this year of 161,000, which is healthy for an expansion that is now into its tenth year though it’s below the 223,000 average in 2018.
Even more surprising, the jobless rate fell to 3.5%, the lowest in half a century. The number of employed Americans surged by 391,000, which drove the overall employment ratio up to 61%, the highest since December 2008. The rising employment ratio shows that Americans who have been on the sidelines since the Great Recession are continuing to stream into the labor market long after economists on Wall Street and at the Federal Reserve concluded the U.S. was at full employment.
The new job seekers include in particular those who are often the hardest to employ. The jobless rate for those without a high-school degree fell by 0.6 percentage point to 4.8%, the lowest since the Bureau of Labor Statistics began tracking this in 1992. The rate for Hispanic Americans fell 0.3 percentage point to 3.9%.
Wage gains slowed a bit to 2.9% year over year, down from 3.2% in August. But the gains for non-supervisory and production workers were higher than for supervisors. These are the fruits of a long expansion that accelerated in 2017 and 2018 from the near-recession in the last two years of the Obama Presidency.
The question is whether the expansion can keep going, and on that score there were signs of a slowdown in the jobs data. That’s especially true in trade-related industries such as manufacturing (minus 2,000 jobs in September) and durable goods (minus 4,000). These aren’t panic numbers but the labor market is often a lagging economic indicator.
Signs of a slowdown earlier in the week in the Institute for Supply Management surveys jolted investors, especially the 47.8 reading on manufacturing. Anything below 50 signals contraction. The non-manufacturing index fell to 52.6, down sharply from 56.4 in August.
Friday’s jobs report suggests that the economy isn’t close to a recession, but growth has slowed markedly amid President Trump’s volatile trade policy. The stock market has barely budged since January 2018 when Mr. Trump’s trade offensive began. Trade uncertainty has taken the top off business confidence and investment, reducing annual GDP by at least a half a point and probably more. Thank heavens for tax reform and deregulation, or the economy would almost certainly be in recession.
The policy lesson should be obvious as Mr. Trump heads into an election year and an impeachment brawl. Calm the trade battles to reduce uncertainty. Press Congress to pass the revised Nafta accord but don’t threaten unilateral withdrawal if Nancy Pelosi doesn’t allow a vote. Reach a truce with China if a larger deal isn’t possible. Stop threatening tariffs on Europe.
Mr. Trump’s trade war has ended his chance of reaching sustained growth of more than 3% during his term, but workers will give him credit for the jobs and wage gains if he can avoid further policy mistakes that tip the economy in recession.
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