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U.S. Added 209,000 Jobs in July, Beating Expectations Jobs, Factories and Stocks Provide Economic Lift for Trump
(about 4 hours later)
The Labor Department released new hiring and unemployment figures on Friday morning. This is the latest official snapshot of the state of the American economy. A stock market hitting record highs. Foreign corporations announcing big new plants in the United States. And robust hiring that has brought the unemployment rate to a 16-year low.
• 209,000 jobs were added in July, somewhat above Wall Street economists’ expectations. That convergence added up to a solid economic report card on Friday that President Trump was happy to present to the nation as a sign of good work.
• The unemployment rate was 4.3 percent. June’s jobless rate was 4.4 percent. On the hiring front, the Labor Department reported that 209,000 jobs were added in July, somewhat above Wall Street economists’ expectations, with the unemployment rate matching May’s 4.3 percent, the lowest since early 2001.
• Job gains for May and June were revised upward by 2,000. Hours earlier, two Japanese automotive giants, Toyota and Mazda, said they would locate a new factory at an undetermined United States location that will employ about 4,000 workers, a trophy in Mr. Trump’s campaign to reverse the flight of American manufacturing jobs.
“This is a Goldilocks report for the markets,” said Michael Gapen, chief United States economist at Barclays, meaning it was neither discouraging nor overheated. Citing the healthy payroll growth and steady gain in average hourly earnings in July, he added, “It really bodes well for macroeconomic growth.” And while the stock market had a relatively quiet day, the Dow Jones industrial average reached another high, two days after it closed above 22,000 for the first time.
Indeed, stocks closed higher as the Dow Jones industrial average reached another record high, two days after it crossed the 22,000 mark for the first time. As all that positive economic news ricocheted through Wall Street, on social media and around office cubicles, conversation inevitably turned to one question: How much credit does Mr. Trump deserve?
Economists had been expecting a gain of 180,000 jobs, so the actual data is a sign that the economy is growing faster than other indicators had suggested. In a series of early-morning tweets, the president claimed quite a bit.
And for years, the missing ingredient in the job report has been robust wage growth, although pay has occasionally jumped on a monthly basis. Now average hourly earnings are up a decent 2.5 percent on a 12-month basis. On the hiring news, he declared, “Excellent Jobs Numbers just released — and I have only just begun.” Earlier, in addition to saluting the “great investment” by Toyota and Mazda, he noted, “Consumer confidence is at a 16 year high .... and for good reason.” Both tweets pointed to a looser regulatory environment as a factor.
In July, average hourly earnings rose 0.3 percent. That compares with an increase of 0.2 percent in June. Of course, as economists are fond of saying, correlation is not causation. Many of the trends Mr. Trump is benefiting from — falling unemployment, steady hiring, a rising stock market — were firmly in place under his predecessor, Barack Obama.
While faster wage growth is certainly good news for American workers, Wall Street worries that signs of real tightness in the labor market might force the Federal Reserve to tighten monetary policy more quickly. Very low interest rates have kept the financial markets buoyant, so any sign that the central bank’s easy-money policies are coming to an end could take some of the air out of stocks. And in the case of Friday’s jobs data, Mr. Trump is citing figures he called phony not long ago on the campaign trail.
Mr. Gapen said the data confirmed that the Fed would most likely stick with the plan Wall Street has been anticipating: a reduction in its bond holdings in September as the central bank gradually reduces its stimulus efforts, followed by a rate increase in December. In the end, there is no way to quantify exactly how much credit the president is due for attracting foreign investment or encouraging the creation of jobs here instead of overseas.
To be sure, there were pockets of weakness. Retailers have been shedding jobs amid the growth of e-commerce, and in July stores added just 900 workers over all. Still, Mr. Gapen said, the retail weakness “was more than offset last month by gains in professional and business services, leisure and hospitality and health care.” But even some skeptics of his overall approach concede that Mr. Trump’s promises of tax reform and higher infrastructure spending, as well as pressure to increase domestic manufacturing, are resonating in boardrooms in the United States and abroad.
President Trump lost little time in reacting to the report, hailing it on Twitter as “excellent” and saying, “I have only just begun.” “It’s still 80 percent lip service in the corporate world, but there are some executives who want to support Trump’s initiatives,” said Howard Rubel, an analyst at Jefferies who covers aerospace and defense giants like Boeing and United Technologies.
Even before the report was released, Mr. Trump had issued a series of early-morning tweets citing economic progress, including consumer-confidence soundings and plans by Foxconn and by Toyota and Mazda to build American plants. Ravin Gandhi, founder and chief executive of GMM Nonstick Coatings in Chicago, is a case in point.
For all the debate over President Trump’s tweets claiming credit for a strong economy and the rally on Wall Street, the bottom line is that the labor market is fairly healthy now — and was in recent years under President Barack Obama. Payroll gains averaged 180,000 in the first half of 2017, compared with 193,000 in the second half of 2016. The son of immigrants from India, Mr. Gandhi fiercely opposed Mr. Trump before the election, even appearing on CNBC to denounce the candidate’s proposals on trade, immigration and health care.
As a candidate, Mr. Trump pointed to the participation rate, which is at multidecade lows, and suggested that the true unemployment rate is much higher than is reported. In July, the participation rate stood at 62.9 percent, an increase from 62.8 percent in June and level with January, when he took office. After Mr. Trump was elected, however, “I bought into the economic growth rhetoric,” Mr. Gandhi said. “I was hearing stories about 4 percent growth, about tax reform and my health care costs going down.”
Although some of the decline in participation is due to the retirement of the baby boom generation, the participation rate for prime-age workers has also been weak. None of that has come to pass, of course.
So while hiring and the overall unemployment rate continue to be important, an even better gauge of how Mr. Trump is handling the economy in the months ahead will be whether wages and labor participation both rise. But this year Mr. Gandhi has invested $3 million to expand domestically and hired more than 20 employees, even though sales are flat compared with 2016, when they were up by double digits.
“It’s nuanced,” he said, noting that his company was recently purchased by a Japanese conglomerate and that the American houseware firms he supplies make their pots and pans mostly overseas.
“A lot of us who were against Trump are still rooting for him to succeed because as citizens we want the economy to do well,” Mr. Gandhi said. “But so far, it’s been all hat and no cattle.”
Despite generally strong earnings, many manufacturers continue to shed jobs.
In December, Mr. Trump persuaded United Technologies, parent of Carrier, not to proceed with a shutdown of an Indianapolis plant, but the company did go ahead with several hundred previously announced layoffs last month.
“When it matches the market, companies are still establishing production outside the U.S.,” Mr. Rubel said.
“If it’s a tossup, though, companies seem more willing to keep the work here,” he added. “The optics are better, especially if it will help them in their pitch for tax reform, infrastructure or to get defense contracts.”
Perhaps even more than outsourcing, the real threat to job growth for Mr. Trump’s blue-collar base comes from automation and other efforts to improve productivity on the factory floor. In Mr. Obama’s final year in office, Boeing’s work force fell to 148,138 from 159,469, according to Mr. Rubel.
Boeing reported stellar earnings recently, lifting its stock to record levels, but it has cut another 4,500 positions since Mr. Trump moved into the White House.
Boeing and Carrier aside, reviving manufacturing has been one of Mr. Trump’s principal economic goals since taking office, with visits to places like the Snap-on plant in Kenosha, Wis., where he announced his “Buy American, Hire American” initiative in April.
The factory sector has been showing signs of life this year, although experts said that has more to do with improving economies overseas and a weaker dollar that benefits exporters than with any specific White House policies. Still, manufacturers added 16,000 jobs in July, lifting employment in the sector to its highest level since January 2009.
On the other hand, wage growth, the missing ingredient throughout the recovery, has remained tepid. The Labor Department said wages grew by 0.3 percent last month, bringing the 12-month gain to 2.5 percent, down from 2.8 percent a year ago.
It is not such good news for American workers, but moderate salary gains are just fine with Wall Street. The lack of upward pressure on wages gives the Federal Reserve ample room to maneuver before its next rate increase.
“This is a Goldilocks report for the markets,” said Michael Gapen, chief United States economist at Barclays, meaning it was not too hot or too cold, but just right for investors and Fed policy makers. The Dow closed up 66.71 to finish the week at 22,092.81.
Mr. Gapen said the latest jobs figures suggested the central bank would stick with the plan Wall Street has been anticipating: a reduction in its bond holdings in September as the central bank gradually reduces its stimulus efforts, followed by a rate increase in December.
For Mr. Trump and leaders from both parties on Capitol Hill, business owners say the key is to requite their increased optimism and hiring with actual accomplishments.
“We may not agree in corporate America with the president on social issues like global warming or transgender people serving in the military,” said Tom Gimbel, chief executive of LaSalle Network, a Chicago staffing company.
But Mr. Gimbel, who opened a new office in Nashville on Monday and plans to add 100 workers this year, said he remained confident that the president and Congress would deliver on their promise of business-friendly legislation in the next year or two.
“Trump hasn’t done anything tangible yet, but he has injected hope for corporate growth, tax reform and deregulation among business leaders, and that’s driving hiring,” Mr. Gimbel said.