When the Labor Department reported Aug. 4 that the U.S. economy had created 209,000 jobs in July and a revised 231,000 the previous month, it showed that employers remain confident even though President Donald Trump and Congress have approved no new legislation to spur growth.
Trump has promised regulatory reform, infrastructure spending and tax cuts, but the business community has shown it does not need to wait for such incentives before it puts more people to work.
The unemployment rate fell to 4.3 percent, a 16-year low.
“It was a surprisingly solid report.” Josh Wright, chief economist for cloud-based talent acquisition software maker iCIMS, told Forbes. “Unemployment is declining at the same time job creation is rising. That’s a really good thing.”
Bloomberg noted the breadth of the job gains, which included the largest increase in leisure and hospitality employment since September of 2015.
Gains at restaurants drove the increase. Hiring rose to five-month highs in manufacturing, education and health services.
“This was a banner jobs report,” Jed Kolko, chief economist at Indeed, told Yahoo Finance. “With the strong payroll number in July, job growth in the past three months is ahead of the 2016 pace and way ahead of what’s needed to keep up with population growth. Working-age adults are now more likely to be employed than at any time since the recession.”
Pay increases remained weak — the government said wages rose 0.3 percent in July, and they have grown just 2.5 percent during a 12-month period through July — but that did not trouble stock investors.
“This is a Goldilocks report for the markets,” Michael Gapen, chief United States economist at Barclays, told the New York Times after the Dow Jones industrial average finished the first week of August above 22,000.
In the afterglow of the jobs report, Corporate America appears to remain confident that Congress and Trump will eventually deliver legislation that drives future growth.
“Trump hasn’t done anything tangible yet, but he has injected hope for corporate growth, tax reform and deregulation among business leaders, and that’s driving hiring,” Tom Gimbel, chief executive of LaSalle Network, a Chicago staffing company, told the Times.
Surveys have shown that the public still has faith in the economy, but the latest Commerce Department report on consumer spending showed that Americans boosted outlays by just 0.1 percent in June, the smallest amount in five months.
“All in [all], it wasn’t a great finish to the second quarter for the U.S. consumer,” Jennifer Lee, senior economist at BMO Capital Markets, told MarketWatch.
One thing Americans will find encouraging going forward is that inflation was tame in June.
The Personal Consumption Expenditures Price Index, the inflation gauge the Federal Reserve prefers to rely on, was flat for the month. It has increased just 1.5 percent during the 12-month period through June.
Personal income was unchanged in June. Reuters said that was the weakest reading since a 0.1 percent dip last November and it followed a 0.3 percent increase in May.
The major development in consumer spending that economy watchers noticed is that auto sales fell overall by 7 percent in July from a year earlier, to 1.42 million, as reported by Autodata.
Sales at Toyota rose 3.6 percent, and they rose 6.9 percent at Subaru, but the Big Three — General Motors, Ford and Fiat Chrysler — saw sales fall 15.5 percent, 7.4 percent and 10.5 percent, respectively.
Japanese automakers Nissan and Honda reported sales declines of 3.2 percent and 1.2 percent, respectively. Korean auto brands Hyundai and Kia were down by 27.9 percent and 5.9 percent, respectively.
“If the consumer has any say, don’t expect any major improvement in growth,” Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa., told Reuters. “Yes, manufacturers are saying things are good, but with vehicle sales trending downward, compared to last year, it is likely there is little room for further improvement.”
Despite Naroff’s view, the economy ended the first half with several positive signals that suggest American consumers are taking Washington’s turbulent politics in stride and focusing on improving their lives.
At the top of the list was the Commerce Department’s report that the nation’s gross domestic product expanded by 2.6 percent in the second quarter as consumer spending rose. The GDP’s growth rate more than doubled the first-quarter pace of 1.2 percent.
“After the winter blues, the economy has rebounded,” Sung Won Sohn, an economist at Cal State Channel Islands, told the Los Angeles Times.
MarketWatch noted that the economy has expanded for the past eight years as it overcame the Great Recession and that the country has added 16.6 million jobs since 2010; GDP growth of 2.7 percent is predicted for the third quarter.
“The real economy remains in good shape,” Andrew Hunter, U.S. economist at Capital Economics, told MarketWatch.
U.S. News & World Report said a rebound in the second quarter after a weak start to the year is starting to become a pattern.
The publication noted that the first quarter has been the weakest for growth in 2016, 2014, 2011, 2010 and 2009.
“Through the first half of the year the pace of U.S. economic activity appears to be on trend with what we are accustomed to seeing with the current expansion — GDP growth registering another disappointing first-quarter growth performance, to be followed with a stronger pace of growth in the second quarter,” Sam Bullard, a managing director and senior economist at Wells Fargo Securities, said in a research note that U.S. News quoted in its story.
Bloomberg said a steady job market and household finances boosted by stock and home-equity gains fueled consumer spending during the second quarter. The economy has grown by 1.9 percent during the first half of the year.
At least one economist was not overly impressed by the second-quarter spurt.
“It’s a 2 percent economy, plus or minus a little bit,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, told Bloomberg. “We continue to plod along.”
Consumers remain generally upbeat, though. A key survey found that the public believes the economy will continue to grow and that the job market will continue to expand.
The Conference Board’s Consumer Confidence Index rose from 117.3 in June to 121.1 in July — within four points of the 16-year high of 124.9 that the index reached in March.
“Consumers’ assessment of current conditions remained at a 16-year high and their expectations for the short-term outlook improved somewhat after cooling [in June],” Lynn Franco, director of economic indicators at The Conference Board, said in a statement. “Overall, consumers foresee the current economic expansion continuing well into the second half of this year.”
This article originally appeared in the September 2017 issue.