July Jobs Report takes a little off the top

What a difference a month makes, as the Labor Department released its figures, on Friday, for the July job numbers that showed an accurate prediction by economists for 164,000 jobs that sent those that were worried about May’s dismal numbers, that there was a ray, or several rays of sunshine, that gave hope to the many economists and academics that want to see the good news of the American economy preached wide and far.

As usual the much ballyhooed unemployment rate of 3.7 - the best since 1969 produced a joyful noise from the Trump Administration: “July's Employment Situation Report demonstrates the steady and consistent growth of the American economy,” said Acting Labor Secretary Patrick Pizzella. “With Labor Day a month away, we have not seen an unemployment rate this low on a Labor Day since 1952.”

There are the cheerleaders, like Pizella, but there are also the naysayers who as they pull back from the screen and look at the details, and the most salient shot, is once again low wages, that increased by only by 8 cents, on average.

The household survey, the real barometer of the unemployment scene was 7 percent, which puts the view in perspective, that the economy is slowing down, not to a grinding halt, but is more of a walk, than a run.

CNN reported that, "After an acceleration in 2018, job growth in 2019 is somewhat slower but still solid," [and] Gus Faucher, chief economist for PNC Financial Services, wrote in a note to clients. "A tight labor market that is making it difficult to find workers; reduced fiscal stimulus, trade tensions, slower global growth, and business uncertainty are all weighing on the labor market."

The increase in wages, as we have seen for months is the sticking point and with only an increase of 3.2 percent, resulting in an hourly wage increase of $27.98, that has barely outpaced any cost of living increase.

When adjusted for inflation, workers are only making 1.6 percent less than they were a year ago.

Some Americans are wondering about what some economists and conservative columnists have described as a “boom”; and Heather Long, writing in The Washington Post, earlier this month, noted that there is a “two-tier” recovery” that has 60 percent of the population benefiting, while 40 percent “have seen paltry or volatile wage growth, rising expenses for housing, health care, and education and increased levels of personal debt.”

Let’s add to that an increase of food, and the picture has darkened, and while clothing and utility costs felt, the result was that afterwards, inflation fell to 1.6 percent, having adverse effects on wages.

Adding some good news is “workers also continue to jump into the job market, with 370,000 people entering the labor force in July. And people are finding jobs faster after losing one: The average duration of unemployment dropped to 19.6 weeks, which is the lowest it's been in this economic cycle.”

Then some bad news: “The goods-producing sector, however, has been sagging all year. The Institute for Supply Management's manufacturing index, which measures optimism among manufacturing companies, declined to a three-year low in July as uncertainty around trade policy continued to make future planning difficult,” added CNBC.

Friday’s news that President Trump was willing to slap more tariffs on China added to the worries of smaller companies, whose equally smaller supply chains can further suffer the consequences.

“Manufacturing added only 16,000 jobs in July — not much for a sector with 12.9 million jobs overall — while the number of hours that factory workers work in a week declined to their lowest level since 2014. Mining and logging industries, which have been rocked by volatile oil prices, subtracted 5,000 jobs. Construction employment was also essentially flat, with heavy and civil engineering construction shrinking by 4,300 jobs.”

The much heralded Republican tax cut, has left most families in abeyance, and received only a slight bump, soon to evaporate, while corporations will receive permanent benefits.

“When you take inflation into account, workers’ real wages only grew about 1.6 percent over the past year. This is worth emphasizing: During the longest economic expansion in US history, with record-low unemployment, workers are only making 1.6 percent more than they did a year ago, after adjusting for inflation,” reported Vox.com.

The mixed bag of the tax cuts are to be seen more accurately in the future, but it seems that the panacea for the US economy has not been seen.

In November of last year, The New York Times, noted: “Data from large public companies, however, suggest that most workers received relatively small shares of their employers’ corporate tax savings.

In particular, “The nonprofit research group Just Capital, which is tracking 1,000 large public companies’ reports of how they are spending their tax cuts, calculates that the typical worker at one of those large companies has received about $225 this year in increased salary, a one-time bonus, or both, attributable to the new law.”

Even more baleful is this from their coverage: “Many companies also said they would use tax savings to create jobs. But the Just Capital research finds that, since the tax cuts were passed, the 1,000 largest public companies have actually reduced employment, on balance. They have announced the elimination of nearly 140,000 jobs — which is almost double the 73,000 jobs they say they have created in that time. About half of those net losses came from companies in the restaurant and leisure industries, the analysis found.”

On the corporate side ,the restructuring that the Trump administration has championed a new economy has faded, we now see that while “It’s true that business spending on fixed investment — such as machinery, buildings and equipment — rose, jumping 11.5 percent and 8.7 percent during the first and second quarters. The first-quarter jump was the fastest for investment since 2011. But that pace fizzled during the third quarter. Recently data showed third-quarter business investment rose at an annual pace of 0.8 percent.”

July did see a slight increase in labor force participation from just under 62 percent in June to 63 percent, the highest since March, but as we have seen, this figure is increasingly volatile, despite the recent uptick.

Recalling  what Jim O’Sullivan, chief U.S. economist at economic and research consulting firm HFE said in a note to the WSJ, last month: "The data are unlikely to stop the Fed from easing at this month’s meeting; the well-signaled easing reflects officials’ worries about the potential drag on growth from trade-related 'uncertainties,' along with sub-2% inflation. However, the report adds to the likelihood that the easing will be of 25 rather than 50 basis points."

Federal Reserve Chair, Jerome Powell, now, seems to be on that cautious path, and the recent cut, “its first interest-rate cut since 2008[shows some concern]. Policymakers at the central bank said the job market remains strong, but that they're worried about the U.S. and global economies slowing down and the uncertainty caused by the U.S.-China trade war;” but also as previously noted, this may be a cautious plan for a probable increase in rate cuts, as the Chair mentioned, to keep the Fed on their twinned goals of full employment, and inflation at 2 percent, or below.