This cooling down might lead the Feds to cut rates, currently on hold for now at 5.3 %, but in what has been a seesaw of many reports, not to mention market reactions, in the not too distant past, many in government and the banking community predicted a recession, and pooh poohed even the very idea of a soft landing that both Powell and Secretary Treasurer Janet Yellen said was going to happen. The fact that there was no recession and that the soft landing in fact occurred shows the unpredictable, but steady, nature of the American economy, over the last 18 months.
“The slower jobs report will be welcome news to the Federal Reserve and signals that interest rate hikes are impacting a labor market that has been extremely resilient over the past few years,” said Joseph Gaffoglio, president of Mutual of America Capital Management to The Hill.
The good news is that despite all, the American economy being solid, the elephant in the room is, of, course, inflation, and after a severe 4th quarter reduction in 2023, and some dwindling, it rose to 3.5% in March, from 3.2% In February..
“It’s not a bad economy; it’s still a healthy economy,” said Perc Pineda, chief economist at the Plastics Industry Association to The New York Times; “I think it’s part of the cycle. We cannot continue robust growth indefinitely considering the limits of our economy.”
Even with a moderation in wages, to 3/9 %, they are still above inflationary prices creating a considerable drive in consumer spending, the driver of the US economy, but where does that money come from? As we have noted before, it's still the surplus of pandemic savings, but economists are concerned about what happens when that money runs out, and savings are depleted.
The devil is in the details as the old cliché states, and the heavy hitters, for April, are still showing remarkable strength, with an increase in health care and education adding 95,000 new jobs, retail which had a shaky report in the 4th quarter of last year, now with a surfeit of 20,000 jobs; construction still resilient with 9,000 new jobs, which some are attributing to state and local building efforts, and manufacturing is holding steady by adding 8,000 jobs, and while leisure and hospitality are still gaining, but at a disappointing 5,000 new jobs.
The unemployment rate inched up to 3.8% not a significant figure but, “Layoffs remained low and most job sectors appeared stable. Wage growth eased notably, though the unemployment rate remained under 4 percent for the 27th consecutive month — the longest stretch in more than 50 years. In fact, some economists said that the April data offered hopeful hints that the economy was headed toward a more stable footing, "reported the Times.
The GDP has increased, albeit slower than desired, at 1.6 annually, and has been attributed to regional challenges in finding a job, the durability of inflation, and those high interest rates that plague some consumers, but as noted, some are still spending freely.
The losers? That catch all category of business services that showed a negative balance of 4,000, accompanied by a corresponding drop in temporary hires. And, this might be a cost factor since hiring costs have increased by 4.2 %, and were 2.9% in 2023.
One strong area of gains was for women, at prime working age, 25 to 54 years old, at 78 % or 307, 000 and while this is welcome news, there is still an income gap between those with men, and has deeply affected lower income women of color; and, child care, unsubsidized in the US, forces many women to work part time, leading to structural inequality.
Of course, the White House has looked at the report and is pleased, both with the cooling that could lead to future interest cuts, but that the slight uptick in unemployment is still showing a solid economy, and in fact the household telephone survey is nearly tied with this figure.
“Just 34 percent of voters approve of how President Biden has handled the economy, and 29 percent approve of his handling of inflation, according to a recent CNN poll, in their reporting, and “He’s also trailing former President Trump, the presumptive Republican presidential nominee, who voters perceive would do a better job with the economy than Biden,” in their coverage for the April report.
Meanwhile, as was noted, by the Times, “On Truth Social, Donald J. Trump, the presumptive Republican presidential nominee, declared the report showed “HORRIBLE JOB NUMBERS.” Under Mr. Trump’s presidency, before the pandemic’s impact took hold in March 2020, monthly job gains averaged about 180,000 — just a tad higher than April’s gain.”
As the 2024 election season ramps up, so has scrutiny of the Fed and its interest rate policy, but the Federal Reserve maintains a traditional detachment from politics, and as Powell noted:
“If you go down that road, where do you stop? So, we’re not on that road. It just isn’t part of our thinking.”
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