Jobs Report Delivers for Trump But Unlikely to Sway Midterms
(Bloomberg) -- President Donald Trump and Republican candidates couldn’t have asked for a better jobs report ahead of Tuesday’s midterm elections, but translating to poll gains and sustaining the growth may prove harder.
Nonfarm payrolls rose 250,000 in October from the prior month, Labor Department figures showed Friday, topping the 200,000 median estimate of economists. Average hourly earnings for private workers advanced 3.1 percent from a year earlier, breaching 3 percent for the first time since 2009, while the unemployment rate held at a 48-year low of 3.7 percent.
The October data, while strong across the board, may be less of an indicator of the trend than usual because payrolls and wages both reflected temporary boosts from hurricanes this year and last year.
While the underlying numbers were positive and some degree of gains is likely to continue, several factors weigh heavy: the U.S. trade war with China poses a risk, companies may be slowing capital investment and the effects of fiscal stimulus such as tax cuts are expected to fade. In addition, the figures reinforce the outlook for Federal Reserve interest-rate increases that will keep economic growth in check.
“We’re going to continue to see solid job gains. This job market has more room to run,” said Ryan Sweet, head of monetary policy research at Moody’s Analytics Inc. in West Chester, Pennsylvania. At the same time, “The attention will shift toward trade but also the Fed,” which could raise interest rates another three or four times in 2019, he said.
What Our Economists Say
|The October jobs report provided reassurance that the economy is on sound footing, despite the dramatic seesaw in the pace of hiring gains over the past several months. The breadth of job creation remains solid -- an important indication that the escalation of trade tensions is not being whitewashed by short-lived fiscal stimulus stemming from tax cuts. Furthermore, the pace of hiring is robust, especially after accounting for hurricane distortions.|
-- Carl Riccadonna, Yelena Shulyatyeva and Tim Mahedy, Bloomberg Economics
Read more for the full note here.
For Republicans, the good news about the economy has mostly been drowned out during the election campaign by Trump’s focus on immigration and his attacks on Democrats, both of which energize the president’s core supporters. GOP candidates in heavily Republican states and House districts have followed Trump’s lead, largely abandoning tax cuts and economic growth as election issues.
Trump’s approval ratings in Gallup’s weekly poll have been mired in a narrow range between 38 percent and 44 percent since September, a level that historically corresponds with losses for the president’s party in midterm elections.
The president tweeted that the jobs numbers were “incredible” and urged people to “Keep it going, Vote Republican!” Kevin Hassett, chairman of the White House’s Council of Economic Advisers, said on Bloomberg Television that “we’re seeing the wage growth that everybody said was impossible.”
Polls such as the weekly Bloomberg Consumer Comfort Index show wide partisan gaps on views of the economy. A Pew Research Center survey in September-October showed significant majorities of voters who support Democratic candidates saw the rich-poor gap and wages as “very big” problems in the country today.
The prospects for Republicans contrast with numbers such as broad-based hiring in October, including 30,000 in construction, 32,000 in manufacturing and 179,000 in services. Other positive signs included the participation rate, which increased to 62.9 percent from 62.7 percent, while the employment-population ratio rose to 60.6 percent from 60.4 percent.
“As long as job growth is steady, the jobless rate is low, and wages continue to edge higher, as long as we continue to keep climbing, that’s the basic support that you need for the consumer,” said Jennifer Lee, senior economist at Bank of Montreal in Toronto. Yet the prospect of more tariffs and Fed tightening loom as headwinds, she said.
Wage gains, while also distorted to some extent last month by hurricane effects, are probably arriving at a new normal of 3 percent, according to economists. There are also signs that pay hikes are taking hold more firmly: Amazon.com Inc. just raised its minimum hourly wage to $15 for U.S. employees. J.B. Hunt Transport Services Inc. and retailers Costco Wholesale Corp. and Target Corp. are among companies that have either promised or delivered higher wages.
The long-awaited gains follow relatively tepid increases throughout the current expansion, which in mid-2019 will become the longest in U.S. history. The advances are probably still not rapid enough, though, to spur inflation concerns among Fed officials, and will probably keep them on a path of gradual interest-rate hikes.
“The labor market is cookin’, and that’s the bottom line,” said Ward McCarthy, chief financial economist at Jefferies LLC. “What’s really impressive is that the unemployment rate would’ve declined if the participation rate hadn’t risen, and that’s a good thing. You still have more people coming back to the labor market. There’s a lot to like.”
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