Brief # 14
This past week, the United States Department of Labor reported the unemployment rate fell to 3.9% – a 17-year low. This makes the 3.8% target by the end of 2018 well within reach for the Trump administration and the Federal Reserve. Furthermore, nonfarm payroll jobs increased by 164,000 in April and 135,000 in March. African-American and Latino unemployment rate also hit records lows as the unemployment rate fell to 6.6% and 4.8%, respectively; this is the lowest jobless rate for these ethnic groups since the 1970s. Naturally, President Donald Trump and his economic advisor Gary Cohn attribute strong economic growth to the Trump tax cuts Congress passed in December.
On other metrics, the economy appears to be as strong. The “Broader Unemployment Rate” – a metric that includes dissatisfied workers or part-time workers in 2009 was over 17%. By April 2018, this number also feel to 7.8% showing signs of continued economic growth. The Labor department also announced that the US has a record of 6.6 million job posting.
Despite strong jobs growth, wages haven’t fared as well. Wage growth has occurred but not near the 4,000 USD annual figure the Trump administration predicted. From January to April, average hourly earnings only increased by 13% (multiplied by 12 months to average around 260 USD). Economist predicted for a 3.9% unemployment rate, wages should theoretically increase by a far greater margin than the 2.6% when compared to last year. Wages would have to hit a margin of 3% for the average consumer to feel the benefit.
President Trump was quick to declare the tax cut a victory for job creation and economic growth. In economics, it is always important to refer to raw data to determine the veracity of presidential claims- especially this President. President Trump may say one thing while data shows the full picture.