July Jobs report takes a dip with a strong forecast

Those looking for a dramatic change in the July Jobs Report were in for a surprise, not only was the figure of 157,000 jobs, less than the 190,000 predicted, but the banner, or what we prefer to label it, the marquee rate, dimmed slightly to 3.9 percent, something that perhaps, was another surprise.

Most observers, economists and analysts were still happy with it, since it showed a strong recovery from the Great Recession, and a remarkable resilience to continue that upward pattern.

Reassuringly, it was reported  that “Despite the lower-than-expected jobs gains, the labor market produced 59,000 more jobs than previously reported in May and June. Employers added 268,000 jobs in May and 248,000 in June, said The Hill.

"Job growth slowed a bit in July to 157,000, but that followed two straight months of very strong gains, and the job market is in great shape in the middle of 2018," said Gus Faucher, chief economist at PNC.”

With the customary revisions, “job gains have averaged 224,000 a month over the past three months, a sign of continued strength,” they noted.

Despite steady growth expected to last through 2019, there are still concerns about employers being able to hire qualified workers, which we highlighted last month, and that some observers have called to lower some standards, up to an including those that might have previous marijuana related offenses.

Opinions vary as to why, but, for some, there is  the lack of technical degrees, or those with S.T.E.M. basics could be holding back the rate of hire, coupled with flat wages, which showed no growth in July, averaging, still, at 2.7 percent.

The Hill also said, that “some economists are forecasting that the jobless rate could eventually hit a historic low in the mid-3 percent range.

"The unemployment rate will fall to about 3.5 percent by the beginning of next year, although job growth will slow somewhat as businesses find it more and more difficult to hire," Faucher said. 

The Federal Reserve is predicted to raise interest rates “at its next meeting in September to 2.25 percent from 2 percent, in an effort to keep the labor market from reaching a boiling point.”

One bright spot is those least educated workers are seeing a much higher rate of success in the employment lines.

“The unemployment rate for those without a high school diploma fell to 5.1 percent in July, the Labor Department reported Friday, the lowest since the government began collecting data on such workers in 1992. At the economy’s nadir in the summer of 2009, the unemployment rate for high school dropouts hit 15.6 percent, more than three times the peak unemployment rate for college graduates,” reported The New York Times.

There was cause for concern from the academies. For example, “High school dropouts make up 7.2 percent of the labor force, and some experts doubted they and other low-skilled workers would ever fully recover from the effects of the recession, said Betsey Stevenson, a professor of economics at the University of Michigan.

“As economists, we worried these workers would be shut out forever,” she said. “But the long duration of the recovery has pulled them back in. As the economy adds more jobs, employers have had to dig a little deeper.”

Another possibility is that non-compete clauses keep wages down, and in some instances hourly wages are 4 percent lower "in states that enforce non-compete than those that do not," noted The Economist, in mid-May.

By definition they ware used to keep departing employees "walking out of the door with valuable know-how, or poaching supplies and customers when they move jobs."

Surprisingly, one in five Americans "are subject to them and nearly two-fifths have had to sign one at some point, as have about 15% of low wage workers and a similar share of employees without university degrees," they continued.

Less than half of them, however, have any "access to trade secrets." And, most importantly, they are often used in low-wage jobs; Jimmy John's sandwich shops used to use them for their restaurant workers and delivery drivers but were forced to stop in 2016 "at the behest of the New York attorney general's office, which said that these agreements "limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued."

What's more is that, according to a University of Maryland study, those "presented with non-competes after they have accepted new job earn on average 10% less than those who know it will be part of the deal in advance, when they are still in a position to negotiate."

In other measurements the Labor Department’s “broadest measure of unemployment, which includes workers forced to take part-time jobs because full-time positions are unavailable, fell to 7.5 percent in July, the lowest since 2001.”

As the Times noted, “All this has translated into better economic opportunities for workers without a college degree, who account for a majority of the workforce. It is a contingent that was championed by Mr. Trump during his presidential campaign, and one that both parties want to appeal to in the midterm elections in November.”

The Times, in their cheerful assessment, said, “The headlines about President Trump’s tariffs on steel and aluminum and a widening trade war with China seem to have done little to put a damper on hiring. The manufacturing sector, which is particularly sensitive to exports, was robust, adding 37,000 jobs.”

At the White House, President Trump “took a victory lap after the new growth figure was released, saying in a speech at the White House that the country is growing "at the amazing rate" and that "we're on track to hit the highest annual average growth rate in over 13 years." 

It’s not a secret that “Republicans are banking on a streak of good economic news to carry them in to the November midterm elections. The booming economy is the base of the GOP's message to hold their congressional majority,” against a predicted blue wave that might have the Democrats win a majority in the House.

“But some GOP lawmakers and business groups are worried that Trump's decision to levy hefty tariffs on close U.S. allies and China will erase any gains from the tax and regulatory cuts,” a serious concern that will refute any plank that will stay the course for the GOP, and their hold as the majority party.

The president is considering raising the tariff on $200 billion in Chinese goods to 25 percent from an initial proposal of 10 percent, “a plan quickly rebuked by a wide range of business groups from retailers to technology firms.”

In what to all appearances seems an escalating trade war, “The Chinese government said on Friday that Beijing will move forward with tariffs of 5 percent to 25 percent on $60 billion of U.S. imports "to guard its interests" if the U.S. follows through with its threats of more duties on its imports here.”

A case in point is that “Canada, Mexico and the 28-nation European Union have all imposed billions in retaliatory tariffs on U.S. goods over Trump's tariffs on steel, aluminum and other goods,” giving credence to the belief to his critics, that the his administration, has the unique ability to overcompensate in one area, while doing damage in another.

In response the president says this is because the U.S. has been treated so badly as a trading partner.

“A separate report on Friday showed that the nation's trade deficit rose to $46.3 billion in June, up $3.2 billion from $43.2 billion in May,” said the Commerce department.

Despite that, manufacturers added 37,000 jobs in July, with construction adding 19,000, bringing the industry total to 308,000 jobs over the year, a figure that many are lauding.

Health care employment rose 34,000 and professional and business services hired 51,000 in July, for a total of 518,000 new jobs created in the past year.

Updated 12 August 2018 at 4:50 p.m. (CSDT)