I’m back from a week on vacation and still crunching the Friday jobs numbers. How the Fed slices them and what the Fed chief says about them this week when he speaks to Congress could be critical.
Until now, the market has been pricing in an “insurance” rate cut, buffering against some future deterioration in the economy. But these resilient jobs numbers hardly make the case for an aggressive move.
Average monthly jobs growth this year ticked up to 172,000. That’s below the average monthly gains of the last seven years, but still hanging in there. Idled workers are entering the labor force. Wages are not as hot as you’d expect with companies so hungry for workers, but overall there’s just no sign yet in the jobs numbers of a late-cycle swoon.
I know, I know, the non-farm payrolls report is a lagging indicator. But the job growth trend is still intact. In fact, total jobs added in the Trump administration so far is an impressive 5.6 million net new jobs, fewer than a million behind the gonzo jobs creation of the Obama administration’s final 29 months (6.4 million).
Of course, the calendar is a landmine. There is still a trade war with China. And there’s budget uncertainty, as lawmakers must work out a budget deal by the fall. The Bipartisan Policy Group estimates the debt ceiling so-called X date is in September, earlier than most thought. Meanwhile, an August congressional recess looms and so do some tough decisions: Another government shutdown, or deep spending cuts, or failing to raise the federal debt limit are all risks for the economy.
