May Jobs Report creates concern for Federal Reserve

Friday’s job report from the US labor Department brought a whopping 272,000 non farm jobs to the American economy, this time far exceeding expectations of 180,00 that most economists had predicted, and with an uptick in the banner unemployment rate of 4.0 from the previous month of April at 3.9 percent, none of which is going to assuage the fears of the Federal Reserve meeting next week to determine the course of the economy, and what many government officials, media pundits and columnists want to see: an interest rate cut.

Making that prediction even more complicated is the increase in wages, to 4.1, and with higher prices and inflation still hovering above their historic mandate of 2 percent, this is a hope against hope for those observers, as more jobs at higher wages will put the brakes on a cut, from the current range from 5.25 to 5 percent.

It should be noted that inflation currently hovering at 3.4 percent has taken a tumble from its 9.0 average in June of 2022.

Hovering in the background is the November presidential election in a rematch between incumbent President Joe Biden, and former president Donald Trump, the presumptive Republican nominee. General trust in the handling of the US economy favors Trump, according to an ABC News/Ipsos poll.

That poll shows Trump with 46 percent, and Biden at 32 percent, despite the fact that any US president has the finger of the scale of the American economy. 

What can easily be determined is that the office holder can influence economic decisions, to a point, and they can, if their party dominates Congress, they, together, can pass legislation to increase certain legislation, such as tax cuts.  The last time this was seen, most recently was Trump passing a permanent cut for the wealthiest of corporations, and a temporary cut for Jane and Joe Average.

The unemployment rate of 4.1 is the highest since January of 2022, reported The New York Times, but it is something that many of the public may not realize, as they do their weekly grocery shopping, and that level of anger might fuel what is predicted to be a dominant issue in the race to the White House.

Confidence in the economy by Americans has fallen to 14 percent, and despite the fall from the high point of inflation, those prices at the supermarket, and at the gas pump are making consumers wince.

To that effect, the Associated Press reported at the end of May that Biden is “releasing 1 million barrels of gasoline from a Northeast reserve established after Superstorm Sand in a bid to lower prices at the pump this summer.”

Located in New Jersey and Maine these sales, “will be allocated in increments of 100,000 barrels at a time.”

The sales will create “a competitive bidding process that ensures gasoline can flow into local retailers ahead of the Fourth of July holiday and sold at competitive prices, the Energy Department said.”

Most importantly, AP noted that,“Tapping gasoline reserves is one of the few actions that presidents can take by themselves to try to control inflation, something that if voters perceive as high can be an election year liability for the party in control of the White House.”

Returning to the jobs outlook, the report shows there are dominant jobs topping the list, mostly in the service sector, particularly health care, and a by product of that surge has been an increase in the percentage of women working in these roles, and of those 68,000 jobs, many with women in their prime working years, from 25 to 54 years of age, hitting 78.1, according to BLS data.

While CNN noted that these levels were once high pre-pandemic, their return does signal an evening of the playing field, and, of course, the option of working at home, for white collar women, has also increased the numbers.

 

Government jobs also did a rebound, especially local and state government, much like in April at 43,000, and hospitality remained steady at 42,000 jobs, and with many Americans enjoying dining out, and with their increased wages those numbers should continue to rise.

The Times also added, “The headline jobs number is a source for celebration for President Biden: “On my watch, 15.6 million more Americans have the dignity and respect that comes with a job,” he said in a statement. But Mr. Biden is trailing in the polls, possibly indicating that Americans care more about high prices than they do about plentiful jobs.”

Taking a look at the household survey, we get a different picture: “That data showed that the number of people who were employed last month actually fell by 408,000, while the unemployment rate rose to 4 percent for the first time in more than two years,” and while there are two different methodologies, employers survey only focusing on employees, the household survey also includes independent contractors, and the self employed, noted the Times, and citing a discrepancy, they added,“Adjusting the household survey to align with the concepts used in the employer survey makes the job losses in May look larger, not smaller.”

If this does occur it might be welcome news for the Feds, who are not expected to cut rates, when they meet dashing hopes for a July cut, but some are betting on a September cut, but as we have previously noted, chair Jerome Powell is committed to the data before he and the Federal Open Market Committee make any cuts.

The recent release of the Consumer Price Index showed that, absent food and energy which are volatile, there was an overall rise in inflation of 0.2 in May, but shelter costs increased to 0.4 percent, "the largest factor" in the monthly index according to the Bureau of Labor and Statistics. They also reported that there was a 0.1 percent increase in food prices.

Overall, for all urban consumers BLS reported the Index was "unchanged, seasonally adjusted, and rose 3.3 percent over the last 12 month, not seasonally adjusted." This is slightly under the expected percentage of 3.5 predicted by many economists.

Of concern will be the increase in hourly wages, and that increase to 4.1 percent coupled with the increase in jobs, without the discrepancy between the two surveys is something that the Fed will certainly keep tabs in in any future rate cuts.

For May, Labor Force Participation for those 20 to 24 years of age fell from 72.4 in April to 70.8 percent in May, less than expected, and June college graduates may have a harder time finding jobs.

Updated June 17, 2024 at 1: 42 p.m. CDT

Trump conviction and future predictions

Thursday's conviction of former president Donald Trump on 34 counts of falsifying business records to cover up an extramarital sexual encounter with adult film star Stormy Daniels has set off a firestorm of criticism, commentaries and predictions, nearly all predictive, but not especially reliable of future events.

Conjecture, in some minds, might be one tenth of the law but time will only tell what lies in store for Trump the presumed nominee for the Republican presidential contest is certainly now for the history books: the first time a former president has been criminally convicted of a crime, this one to pay hush money of $130,000 to the actress through his fixit man, Micahel Cohen, and disguised as attorney fees, but both the falsification of the records coupled with the attempt to influence the 2016 presidential election, illegal under New York State law, brought the 34 count indictment and conviction.

Faith in the often fraught American judicial system has won, say many observers, while those in the Trump camp cry foul politics instead of justice and some are calling it a witch hunt brought to bear on an innocent man. Politics may provide the backdrop, but it does not provide the fullest picture.

Trump himself said, “It’s a rigged trial, it was a rigged trial,” stating another falsehood of the many that has been captured by the national media. He added that Judge Juan Merchan was conflicted, “we had a conflicted judge, highly conflicted. There's never been a more conflicted judge.” 

In a further hyperbole he added that whole the judge, “looks like an angel, but he’s really the devil.”

No matter whose side one is on, the verdict does signal that many of the suspicions that many people had about Trump, his business dealings and his extramarital affairs have now been brought to light.

In the scheme of his other suits, both state and federal, this is merely an opening salvo, as Trump faces federal charges for the illegal confiscation of government papers when he left office, which prompted an FBI raid on his home in Florida, and attempts to overturn the 2020 presidential election, plus state charges in Georgia of election interference.

What may also follow are charges against underpaying employees, and contractors and also overinflating the value of individual properties to take a tax deduction. In short this is only the beginning.

The question of many minds is how will this conviction, since he is now a felon, affect his standing for the presidency; and, perhaps a surprise, there is nothing to suggest that he cannot, and furthermore he can vote for himself, since under New York State law felons can vote after filling the terms of his conviction, be they probation, prison term, highly unlikely in a white collar crime for a first time offender, but it should be noted that Trump like Eugene Debs in the 1920s could run for office from prison.

For voters, both Democratic and Republican many have already made up their minds, but the one area to be determined is how swing or independent voters will be affected, but before we get there, let’s look at what an NPR/PBSNewsHour/Marist poll that said:

“Overall, two-thirds (67%) said a guilty verdict would make no difference to their vote; three-quarters (76%) said the same of a not guilty verdict.

Roughly 1 in 6 voters (17%) said a guilty verdict would make them less likely to vote for Trump. That was true of a quarter of nonwhites and 1 in 5 voters who make less than $50,000 a year and those under 45.”

Then there is the money, following the money might lead to some surfeit of predictions and in the hours following the conviction, the Trump campaign said that they had raised $52.8 million in the 24 hours after the conviction, reported CBS News.

Next up besides the independent and swing voters are the Nikki Haley supporters, who have voted for her by 20 percent in the primaries of Indiana, Maryland and Nebraska, as a protest vote.

There have been attempts by some in the Biden campaign to lure them to their side and there may be an inroad since many of her supporters are college educated, suburban professionals, many of whom are women, who might be turned off by the unsavory details of the Daniels encounter.

An Economist/YouGov poll found that some voters felt that the trial and the conviction were unfair, with 10 percent fair, and 16 percent neutral, but have also noted that the distance between Trump and Biden is close, and averaging the data they find that the median result is 45 percent for Trump and 44 percent for Biden but they do give the cautionary note “that pre election polls have limited predictive power for the final result until the end of the summer in an election year.”