When the Labor Department reported Friday 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 that 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, and 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 risen just 2.5 percent over 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 as the Dow Jones industrial average finished the week 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, it wasn’t a great finish to the second quarter for the U.S. consumer,” Jennifer Lee, senior economist 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 a 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. Wages and salaries rose 0.4 percent in June.
The major development in consumer spending that economy watchers noticed last week 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."
This week is light on economic reports, but economy watchers will see the Labor Department’s Consumer Price Index for July on Friday. Economists’ median forecast is for a 0.2 percent increase after a flat reading in June.
Core CPI, which filters out volatile food and energy prices, is forecast to have risen by 0.1 percent for the month. As long as inflation remains low, businesses have reason to hope that consumers will spend more, even if their pay is not rising as sharply as they would like.