Washington | The US economy added a disappointing 130,000 jobs in August, the Labor Department said Friday, heightening fears that President Donald Trump’s trade war is starting to bite.
The jobs report has taken on greater significance as concerns grow that the US economy has entered a rough patch. Economists had predicted 160,000 job gains in August, but anaemic hiring in manufacturing, mining, truck driving and retail – industries that are most directly affected by the trade war – helped drag employment gains down this summer.
The manufacturing sector is in a recession, and businesses have stopped spending, largely as a result of headwinds from abroad and Trump’s trade battles. Jason South
The slowdown in hiring comes as broader economic growth has cooled this year. The manufacturing sector is in a recession, and businesses have stopped spending, largely as a result of headwinds from abroad and Trump’s trade battles. But the US economy is driven primarily by consumer spending, and so far, that remains strong as workers continue to get pay raises and see “we’re hiring” signs in front of many businesses.
The unemployment rate remained at 3.7 per cent in August, the lowest in nearly half a century, and business leaders complain frequently that they are struggling to find enough workers.
Trump has pinned his reelection on a strong economy in 2020. White House officials have moved aggressively in recent days to highlight good economic news and say the US-China trade talks are going well, despite a lack of substantive progress. Despite the White House’s efforts to tout good news, many business executives remain on edge.
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Hiring in August was boosted by the federal government adding part-time workers for the 2020 US Census. Without the addition of those temporary jobs, the new data reveal private sector companies added 96,000 jobs, the weakest in many months.
Most companies have already scaled back spending on buildings and equipment, and there is concern that they will now cease hiring, a move that could have harmful consequences, as consumer spending drives so much of the US economy. When Americans are fearful of losing their jobs, they tend to halt spending.
So far this year, job gains have averaged 143,000 a month, a noticeable downgrade from last year, when job gains averaged 192,000 a month.
“While I’m not concerned about a downturn lurking just around the corner today, it remains a very real possibility further down the line,” said Steve Rick, chief economist at CUNA Mutual Group, in an email.
Right now, the United States is a tale of two economies. The service sector remains strong with health care and business adding a lot of jobs in August. But industries such as mining and manufacturing that depend heavily on selling items overseas are struggling. Manufacturing has added few jobs this year, a trend that continued in August. Mining employment fell by 6000 jobs.
“Hiring in the US is slowing, not stopping,” said Mark Hamrick, senior economic analyst at Bankrate, although he called it “somewhat concerning” that private sector job gains fell below 100,000.
For many workers on Main Street, the job market still looks strong with more job openings than unemployed people. Wages grew at an annual pace of 3.2 per cent in August, well above inflation and a slightly better-than-expected pace. The number of hours that US employees are working also rose, typically a sign that companies are asking workers to stay later.
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The US economy has been growing for more than a decade now, and the gains appear to be reaching more people. The African American unemployment rate fell to an all-time low of 5.5 per cent in August, and the labour force participation rate edged up to 63.2 per cent, one of the highest rates in recent years as more people are finding jobs.
Larry Kudlow, Trump’s top economic adviser, called it “a very solid number” of job gains.
“August is always a quirky month,” Kudlow said on CNBC, adding that he is encouraged by strong wage growth and the high number of Americans who are getting jobs after being out of the labour force for a while.
Trump announced in August that he would put tariffs on nearly all Chinese imports by the end of the year, a major escalation of the trade war that has left many retailers and manufacturers trying to figure out what to do ahead of the big holiday shopping season.
While many company leaders blame Trump for heightened uncertainty, the President says the Federal Reserve and the media are responsible for slowing growth in the United States. He tweeted shortly before the jobs numbers came out that the Fed should lower interest rates.
“I agree with @jimcramer, the Fed should lower rates. They were WAY too early to raise, and Way too late to cut – and big dose quantitative tightening didn’t exactly help either. Where did I find this guy Jerome? Oh well, you can’t win them all!” Trump wrote, referring to Fed Chair Jerome H. Powell, who Trump hand-picked in 2017 for the top job at the central bank.
The President has tweeted more than 30 times since August 1 that the Fed should cut interest rates aggressively, a move that typically happens when the US economy is on the verge of a recession. The central bank is expected to do a modest interest rate cut when Fed officials meet September 18, well short of the action Trump wants.
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Trump tweeted later on Friday that “The Economy is great. The only thing adding to ‘uncertainty’ is the Fake News!”
Economists largely agree that the US economy is slowing this year from near 3 per cent growth last year to about 2 per cent growth this year. Whether the economy nose-dives from there depends on what happens with hiring and consumer spending.
Google searches for “recession 2019” have spiked to levels not seen since 2008 when stock markets tanked and the economy was in the midst of the Great Recession. But while Americans appear to be concerned, they have yet to pull back on spending as businesses have.
“The economy is a mixed bag right now,” said Gregory Daco, chief US economist at Oxford Economics. “The US economy is hindered by global headwinds and the rise of trade protectionism, but the underlying fundamentals remain fairly solid.”
Washington Post
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