Labor Day is probably the best time to take stock of the American worker and, for them, it’s rarely been better. The unemployment rate is near the lowest level since the 1960s, job growth remains robust, and wage growth is in a general accelerating trend. The unemployment rate was 3.6% in April and May and 3.7% in June and July, and, we’re guessing, August, as well. The last time the jobless rate was lower was in late 1969.
Some still discount low unemployment because the participation rate (the share of those aged 16+ who are either working or looking for work) is lower than it was in prior decades. But back in 1969, when the jobless rate averaged only 3.5%, the participation rate was 60.1%, which is much lower than the 63.0% average so far this year. Notably, in the past twelve months, the unemployment rate for workers without a high school degree has averaged 5.6%, the black unemployment rate has averaged 6.4% and the Hispanic jobless rate has averaged 4.5%, all the lowest figures on record for all these groups, showing the improvement in the labor market is broad-based.
In the last twelve months, average hourly earnings are up 3.2% versus a 2.8% gain in the twelve months ending in July 2018. And if it weren’t for the retirement of Baby Boomers near their peak earning years, the measured growth in wages would be even faster. The Atlanta Fed’s wage growth tracker, which focuses on people who have kept working, shows average hourly earnings up 3.9% in the past year versus a 3.3% gain the year ending in July 2018. Perhaps the best news about the labor market is that, in the past year, the fastest growth for usual weekly earnings has been at the lowest part of the income spectrum, with workers 90% down the income scale having wage gains of 6.2%. Those with less than a high school degree have had wage gains of 6.1% in the past year versus a 3.2% gain for those with advanced degrees beyond college. We’re soon entering an election year, so expect to get a heavy dose of politics when you’re looking for economic news. Regardless, the facts show the American worker is alive and well.
Last week, we saw the first concrete impacts of the ongoing trade war in the economic data as the University of Michigan’s Consumer Sentiment Index declined by the most (on a monthly basis) in more than six years while falling to the lowest reading since 2016. The consumer Expectations Index also posted a multiyear plunge. Consumers finally appear to be worried that the trade war will start hitting their wallets. Over the long holiday weekend, the news was reported that both China and the US have been speaking about a potential trade deal. However, the talks generally comprised arguments over what should be discussed at a potential September meeting between the two sides. If they cannot agree on an agenda for a hypothetical meeting, it appears the two sides are very far apart on reaching any kind of substantive deal. With the global economy continuing to slow down, a deal between the US and China over trade is becoming paramount to the global economy avoiding a recession, if this is even possible at all.
Equities: Market movements last week were all about the potential for a trade deal between the US and China. Following a very volatile and downward moving week two weeks ago, last week saw investors jubilant about the prospects for a trade deal. This jubilance came after President Trump tweeted that the prospects for a trade deal with China were the best they had been for a long time.
○ Dow (3.02%) – Above Average volume
○ S&P 500 (2.79%) – Average volume
○ NASDAQ (2.72%) – Below Average volume
○ Russell 2000 (2.42%) – Average volume