The U.S. Department of Labor reported Friday that payrolls grew for the month of July by 164,00, setting a new record for consecutive economic growth. Unemployment remains at 3.7%, a multi-decade low. Wages continued to increase at a 3.2% gain compared to last year at this time. The U.S. total labor force stands strong at 163.4 million people—another record high. The robust job market has become the catalyst for driving a record-setting economic expansion for 10 years straight. Employment growth averaged about 165,000 per month for 2019.
Some say that the Labor Department shies away from the difficult discussion around the real unemployment rate. This refers to people who are discouraged workers and the underemployed. Friday’s report reflects that the real unemployment rate dropped to its lowest level since December 2000 and is at 7%.
The July report comes as a relief amid worries by some economists, business people and politicians that the U.S. could fall into a recession in 2020. Fears around a weaker global outlook combined with the potential for trade and tariff wars with China could impact hiring were unfounded. The Federal Reserve Bank, concerned about potential economic problems in the U.S. and abroad (with the possibility of inflation), cut their benchmark interest rate this week a quarter percentage point. Analysts claim that it’s a positive sign for companies to continue their pace of hiring despite fears of a broader economic slowdown stoked by possible trade wars and high tariffs.
Professional and technical services jobs were a big gainer with 31,000 new positions added. The healthcare sector increased by 30,000 and financial activities 18,000. Concerns of a manufacturing slowdown were unfounded as jobs in the sector grew by 20,000.
Antithetically, the mining sector fell by 5,000. Motor vehicles and parts dropped by 1,500.
Nissan Motors announced a global downsizing of 12,500 jobs—with 1,400 of those job cuts happening stateside. There are concerns from U.S. automakers around refitting their factories to produce electric cars and driverless technology.
While it’s the lowest unemployment rate in 50 years, curiously, the economy is not creating the conditions for companies to increase workers’ pay. Wage gains appeared to have stubbornly peaked at about 3% a year.
The jobs report and corresponding economic news has been steadily positive. However, be prepared. Nothing ever goes straight up forever. There will ultimately be a correction or downturn in the future. The probability is that it won’t be the U.S. and China saber rattling, but some other black swan, exogenous event that we were not expecting. This is not due to politics; rather, it’s looking back and learning from historical trends where market corrections and recessions happen—rudely interrupting blazing hot growth patterns.