The non-partisan Bureau of Labor Statistics released the February jobs report and it was a big one – 235,000 non-farm job gains – blowing the expectations and predictions of most leading economists. Not to mention, January’s 227,000 new jobs were revised up to 238,000; the announcement marked the beginning of President Trump assuming full management of the U.S. economy.
On 19 previous occasions, Trump accused the number of being “fake”, but after the BLS released February numbers – he triumphantly stated, “They may have been phony in the past, but it’s very real now.”
Are Trump’s Policies Working?
Undoubtedly the media quickly attacked Mr. Trump for flip-flopping on the jobs report simply because the numbers were in his favor. However, the media failed to recognize once Trump clinched his victory in the first week of November, Mr. Obama became a lame duck president.
Corporate boards and executive management teams implemented strategic plans based on the pro-growth policies that Trump campaigned on during the election – less regulations, comprehensive tax and healthcare reform. Its reasonable to assume the decisions made in corporate board rooms a few months ago is an underlying factor in the February jobs report.
I personally advise small and middle market companies, which are often family-owned, and the majority brainstormed growth plans largely based on Trump’s rhetoric. Some of that rhetoric has transformed into action during his first 50 days in office, but all of us still want substantive legislation passed before fully celebrating the “era of big government coming to an end.”
February Jobs Report Uncovers More
But if you take a deeper look into the BLS employment report, then you also notice other interesting variables. The majority of non-farm job gains came from hiring in the construction industry, which may have been boosted from unseasonably warm weather. Construction projects scheduled to kickoff in March or April that were accelerated in February would have led to hiring more civil engineers and trade contractors.
The weakest sector in the jobs report continues to be retail – 26,000 jobs loss in February – undoubtedly not too shocking for us who have observed massive store closures from the nation’s largest retailers such as JCPenney, Macy’s and Sears. Nimble online retailers such as Amazon are disrupting the old traditional brick-and-mortar store model, causing leaders in the segment to restructure their methods for acquiring customers, distributing products and driving brand engagement.
Trump’s unwavering commitment to construct a wall between America and Mexico to curtail illegal immigration has been proposed with funding coming from a 20% border adjustment tax on imports – more challenges for a soft retail industry that certainly will trigger additional job losses.
The labor participation rate was virtually unchanged, moving up slightly to 63% from 62.9%, the number of long-term unemployed continues to be stuck at 1.8 million, with involuntary part-time workers little changed at 5.7 million; and 1.7 million people are marginally attached to the labor force – no real difference from last year.
The U3 unemployment rate is now 4.7%, which is a misleading figure, but when you consider the long-term unemployed, involuntary part-time workers and those marginally attached to the labor force – the U6 unemployment rate is 9.2%, down from 9.8% same time last year. A rate in the 8% range is preferred.
“Big League” Challenges Ahead
Despite continued softness in the labor participation rate and insignificant changes in the number of long-term unemployed, involuntary part-time and marginally attached workers – most economists agree the country is reaching full employment after 77 consecutive months of job gains – you can expect the Federal Reserve to raise interest rates.
Trump and his newly minted administration should not take a victory lap quite yet. Although wages are growing, a solid 2.8% in the past year, but consumer confidence softened in January as household budgets are under pressure from rising health insurance premiums, growing concerns about future job prospects and income potential. Worried consumers rarely purchase big ticket items such as autos, homes and furniture – which is needed to keep the economy booming. Not to mention, a rising interest rate environment will cause other difficulties for the young administration, such as higher interest costs for new Treasuries issued to fund an out of control $20 Trillion national debt.
