April Jobs Report: Rinse and repeat

The April Jobs Report issued on Friday from the US Dept. of Labor was a solid report that gave 177,000 non farm jobs, an unexpected jump from the 130,000 predicted, and with an unemployment rate of 4.2 holding steady it seemed to be a surprise to many observers, especially economists, and many US residents, most of whom were expecting a steep decrease with the news, for months, of federal job cuts from the Department of Government Efficiency led by Elon Musk; but, those numbers are not reflected in this report, since those cuts predated the April data collection.

If March’s report was the calm before the storm, then this is a continuation of the same, and most importantly with the “on again, off again” tariffs promulgated by President Trump in his series of economic injunctions by executive order, as his tool, and not through Congress, the future of the US economy remains uncertain. 

Indeed economic uncertainty has dominated the country for the last 100 days, and there have been steady predictions of financial doom, and fears of a recession; and, taking them in their entirety, there is just cause to worry, as the effects would be born by American consumers, especially lower income families who, as we noted last month, face increased expenditures of at least $1,200 each month.

Trump, however on Friday, reacting to the report, characteristically, remarked, “Just like I said, and we’re only in a TRANSITION STAGE, just getting started!!! Consumers have been waiting for years to see pricing come down,” 

The Hill reported an anomaly cited by Trump when he added that “prices for gasoline and groceries were already far lower than federal and private-sector data shows.”

That aside, April showed consistency across key factors, such as labor force participation, racial and gender employment.

Areas that held strong were health care with an increase of 51,000; transportation and warehousing at 29,000; and, financial activities (a loosely defined category) with an increase of 14,000 job gains.

Especially notable was that there was no significant change in construction and manufacturing, coupled with LFP at 62.6 percent.

“Another stronger than expected jobs report is encouraging, although definitely not top of mind considering the ongoing uncertainty around tariffs and global trade,” Joe Gaffoglio, CEO and President at Mutual Of America Capital Management, wrote in a commentary, and reported by The Hill.

“While the labor market continues to be a bright spot, that could change quickly if the imposition of tariffs leads to disruptions in supply chains and global trade.”

Future tariffs, now, on Monday focusing on “foreign” made films, looming chaos for the American economy continues, but will also roil European markets, as well; and, with holiday retail buyers looking to fill the stores for the Christmas holiday, it is unlikely to be good news, especially since 80 percent of toys sold in America are made in China.

Trump has stated that girls may get two dolls instead of 30, this Christmas, and that they might cost more, scant consolation for parents, who are also facing higher housing costs, despite average wages for April coming in at $36.06, representing a 0.2 wage increase, and for the past year is up 3.8 percent, but, while that has kept up a solid pace overtaking inflation since mid 2023,” most working people do not feel positive about their future.

If perception is three tenths of the law, that wage increase may not mean much, and with many people believing that the American president controls and sets prices on groceries, and gasoline, the president may be in a crunch, and while his base has remained loyal, for the most part, recent polls show that between 52 and 53 percent of Americans believe that his handling of the economy is weakening their support.

Food prices are rising and a trip to even discount grocers show price increases, and the Dept. of Agriculture predicts that “food costs will rise faster than the historical average this year.” 

With many food imports coming from Mexico and other foreign markets, tariffs will increase those costs, especially for discount super markets such as Aldi, who rely on foreign imports.

As The New York Times stated, “The vast majority of data analysts say the eventual effect of President Trump's high tarriffs on the labor market will be fully appreciated in the weeks and months to come, Still, the early impact is reverberating through financial markets, global freight patterns and corporate business plans.”

Currently, and this is a qualifier, as Trump has shown in his previous administration, a propensity to change course, they include 145 percent tariffs on China and 25 percent tariffs on Canadian and Mexican products not covered under the North American trade agreement.

There is a conundrum with the emphasis being on goods, yet the US economy is increasingly oriented “around services, which constitute about 70 percent of U.S. commercial activity,” said the Times, while noting that “good purchases still make up a major chunk if household spending, and more than 40 percent of U.S. manufacturers rely on imported parts or finished goods,” and we see this especially in the auto industry that has serious fears that their profits would be greatly diminished by the Trump tariffs.

The Times reported on Monday that, “The Trump administration has levied 25 percent tariffs on imported vehicles and auto parts. It has raised tariffs on imported steel and aluminum, which are used extensively in cars and trucks.”

Retaliatory tariffs are likely, and Ameicans can expect to pay more for a new car, and already there were long lines to buy new cars before the tariffs took effect, especially for foreign made vehicles which are 50 percent of those sold in the country.

The iconic American car maker Ford announced a profit loss, as reported by the Times, when they said, “Ford Motor said on Monday that the Trump administration’s tariff policies were likely to lower its 2025 profit, before interest and taxes, by about $1.5 billion. The company also dropped its forecast for the year, saying that predicting the future had become too hard.

Ford is less affected by President Trump’s 25 percent tariffs on vehicles than other automakers because most of the vehicles it sells in the United States are made in the country. General Motors said last week that the tariffs would increase its costs $4 billion to $5 billion this year.”

“This is a major shift in U.S. trade policy, especially as it affects trade between the United States, Canada and Mexico. For decades, cars and auto parts have been shipped across North America with little or no tariffs”, added the Times.

There is great fear “that consumers will cut back so aggressively that business will be forced to lay off workers, worsening the economic slowdown,” and with the triple digit tariffs on goods coming from China, a boon for lower income individuals and families, those bargain clothes, coming from Chinese companies such as Temu, Shein and AliExpress, increases affordability, as we noted in our March analysis, quoting an earlier news report, from the Times, acknowledging that while cheap Chinese goods do hurt American manufacturers, these lower priced goods, “are in effect a pay increase, leaving consumers with more money to spend on goods and services.”

The American consumer, the established driver of the economy, is already adjusting their buying habits, and a recent poll cited that 49 percent, nearly half of all Americans have “delayed or sped up purchases as a result. Those figures are far higher for Black (70 percent) and Latinor (71 percent) adults.”

While inflation has significantly lowered than in the past, it is slightly above what the Federal Reserve would like to see, at 2 percent, and core inflation for April was the lowest increase in nearly four years; and, as a reminder it strips out the most volatile components like gas, and energy, and is a key predictor for economists to track where inflation is headed.

Of equal concern is the contraction of the GDP last week to an annualized rate of -0.3 percent in the first quarter, according to the Commerce Dept. last Wednesday, the nation’s worst quarter since 2022, after Trump took office.

Trump blamed former President Joe Biden, saying that the US would have to get rid of the Biden “Overhang”, and that the decrease had nothing to do with the threat of tariffs, “only that he left us with bad numbers,” and urging Americans to be patient.

The Fed meets this week on May 7, and is unlikely to lower interest rates in lieu of this solid report, and will hold off any rate changes until there is less economic uncertainty; noting that current rates are holding steady at a range of 4.25 percent to 4.5 percent.

Again, the worst fear is that consumers will cut back “so aggressively that businesses will be forced to lay off workers, worsening the economic slowdown.”

March Jobs Report: the calm before the storm

For many economists the March Jobs Report released on Friday by the US Bureau of Labor and Statistics gave some restrained  squeals of delight, since it showed a higher than expected gain of 228,000 jobs, far less than the 135,000 many expected, and it also gave some concern for the future of two key areas: interest rate changes from the Federal Reserve, and the heavily promoted, but not yet announced, tariff program by President Donald Trump, and there was a collective tension among those whose job is to take the temperature on the American economy, the largest in the world; and, that palpable tension could be felt across the nation.

In and of itself, the report showed an unemployment rate of 4.2 percent, steady, slightly higher than previous months, but enough to give a measure of satisfaction, and against a background of interest rates holding steady at 4.25 to 4.5 percent created a background of sureness to those same observers.

There were some patterns that remained the same, ebbing and flowing, but fairly predictable in light of previous reports: government employment, swelling to 6,000; retail at 24,000 (in part ot the retreat of severe winter weather); 54,000 in health care; 23,000 for transportation and warehousing,all giving rise to a predictable report.

Wages were also up 0.3 percent with a year on year total of 3.8 percent year over year, and with current inflation, those would keep many heads above water, for the moment,

Trump weighed in, expressing joy, and in a post on social media, reported by The New York Times, saying in his characteristic all caps: GREAT JOB NUMBERS FAR BETTER THAN EXPECTED. IT’S ALREADY WORKING.”

This may have been premature but it is a typical response from the president, but like those prior months we see the main drivers leading in health care and social assistance, giving “a combined gain of 78,000”.

Revisions, which are a typical pattern by the BLS, now have January and February,  net gains of 45,000, but perhaps Joe Brusuelas, chief economist at the consulting firm RSM,who told the Times, possibly the best remark, avoiding optimism, and said, “What we are really seeing is the calm before the storm.”

That storm came swiftly on April 2, Liberation Day, as the White House titled the announcements of tariffs pegged to the US trade imbalance of 10 to 50 percent across the board and a hefty 25 percent on all foreign cars, pending the following week.

Reactions across the US and abroad were swift and negative, as it threw the global economy into disarray, and the specter of a possible recession; and the net results will affect not not only the tariffs that are paid by US importers; but most importantly, passed onto American consumers in the form of higher prices.

Just beyond, but no less significant, is the threat to long standing alliances with foreign countries, further jeopardizing future interactions with global trade.

Adding tariffs on steel and aluminum will crush the American, Canadian and Mexican auto industry with higher prices, and an exchange of  foreign parts, the result will be higher than average car prices, exceeding the average new US car price of $50,000.

While the Trump administration says its goal is to even the playing field and force foreign companies to make their products in the United States, that goal is hardly feasible, with tariff retaliation, and the near impossibility of suddenly reformatting global supply chains, which in the best case scenario could take years, and considerable expense.

There has been growth in some industries manufacturing in the US, under the Biden administration, yet that hasn't been mentioned by the Trump administration, as it steadfastly clings to its goals.

Considering the massive layoffs in the federal workforce, not reflected in this report since the BLS gathers its data points in the first two weeks of each month, it’s equally important to note that, while some are not technically fired, yet, due to being placed on administrative leave, caused by the Department of Government Efficiency, as a goal of firing even more federal workers.

 After the initial decimation of the US Agency for International Development there are planned workforce reductions of 83,000 employees of the Department of Veteran Affairs by the end of September of this year; 20,000 for the Internal Revenue Service, and a possible 1,155 for the Environmental Protection Agency, among many others with a possible total of 40,000 workers, 80% of them living and working outside of Washington, DC, with a resulting devastation not only to working families, but their local economies.

While there has been rampant criticism of the influx of cheap Chinese goods to the US yet many of them principally clothes, from tee shirts to sweaters have actually been a gain for lower income families, and as an earlier report from the Times noted, “lower prices are in effect a pay increase, leaving consumers with more money to spend on goods and services.”

With widespread price increases, low income families, the poorest, will see a double whammy and Marketplace.org reported, “The Yale Budget Lab also estimated [among other cost increases] that Trump’s tariffs alone will slash disposable income in the poorest households by at least $,1700 a year. Simply put. The lowest income households spend more money on necessities.”

Furthermore, they added how higher grocery prices will affect the same households, noting that the top half of higher income households spend about “10% of their income on food,” but noted Tim Richards, an agribusiness professor at Arizona State University, “But, if you look at the lowest 20% of income earners, they spend 30% of their income on food.”

The national media has been awash in criticisms of the president, but even some conservatives have criticized the formula that the White House has used and as Axios has reported:

• “The administration's calculation assigns a value of 0.25 to that variable, which in the math of price elasticity suggests most of the tariff impact does not hit the import price of an item as it enters the country.

• But the AEI paper says they used the wrong value for import prices, and instead used the value for a retail price, or what happens to the final consumer price after the good is imported and distributed.

• They argue, instead, that the right value is 0.945 — in other words, almost all of the tariff hits the import price of a good as it's brought into the country.

• "It is inconsistent to multiply the elasticity of import demand with respect to import prices by the elasticity of retail prices with respect to tariffs," the authors write.

Supporting the formulaic errors, FactCheck.org discussing tariffs, expanded these assertions by claiming that the formula used on the chart that Trump held aloft in the Rose Garden, is self created,”Those listed numbers are simply not tariffs, but some other made up measure based on a formulaic trade deficit calculation,” noted Kimberly Clausing, a nonresident fellow at the Peterson Institute for International Economics, told us via email. “In almost every instance countries’ true trade barriers are far, far lower.”

What worries people most, not only in the US, but across the world is that these tariffs will create a global recession, and as we have seen the stock market drop in the thousands, not seen in 5 years, these fears are justified.

Paradoxically the president said on Monday, from Air Force One, that he doesn't want to see “anything go down,” but suggested that we have to take a little bad medicine to make things good.

Commerce Secretary Howard Lutnick has said that these tariffs and fiscal policies are “worth it” even if they cause a recession, reported the Times, and his position was seconded by Treasury Secretary Scott Bessent who added that the economy might need a ‘“detox period” after becoming dependent on government spending.”

Good, however, may be a relative term with many working families, and even the more affluent facing financial  challenges that will affect retirement savings, children, or grandchildren’s education, among other things.