Hiring surged and wages grew more than they have in almost a decade, the government said Friday in a report seized on by Republicans just before the midterm elections as evidence their policies are delivering for American workers.
Federal economists reported 250,000 new jobs in October, the 97th straight month of gains, and the unemployment rate remained at a nearly half-century low of 3.7 percent, underlining the strong fundamentals of the economy, despite stock market jitters.
Trump moved swiftly to claim credit for the figures, even though he called government jobs data “fake” many times during the 2016 presidential campaign.
“Wow! The U.S. added 250,000 Jobs in October — and this was despite the hurricanes. Unemployment at 3.7%. Wages UP!” he wrote on Twitter, telling reporters later in the day: “We had tremendous job numbers today. . . . That was shocking for a number of people, and that was a tremendous number by any standard.”
Trump and Republican candidates painted the jobs report as further proof of an economic boom, but many independent economists warn that growth has probably peaked and that it is likely there will be a slowdown, especially if trade tensions continue to escalate.
“Tax relief is helping our economy grow and Iowans are keeping more of their hard-earned money,” Rep. David Young (R-
Iowa), who is in one of the most competitive House races in the country against Democrat Cindy Axne, tweeted Friday after the jobs numbers came out.
A growing number of Wall Street analysts and economists say that the tax cuts and additional spending caused a temporary boost that will fade and leave future generations with a substantially larger debt burden.
“The economy peaked in the second quarter of this year and has been slowing for four to five months,” said David Kotok, chair of Cumberland Advisors. “The trade war is slowing the growth rate, because tariffs are a sales tax imposed on Americans by the U.S. government.”
Markets jumped immediately after the release of the report Friday but ended the day in the red, with the Dow Jones industrial average down almost 110 points mainly on concerns that the U.S.-China trade battle won’t end soon.
The strong jobs creation last month defied expectations, even by Trump’s top economist, Kevin Hassett, who said he had been bracing for a dip in hiring after Hurricane Michael pummeled the Florida panhandle and Georgia.
“We were expecting a number way below this, so it was a big surprise,” Hassett said. “We’ve got extraordinary job growth even in the face of literal head winds from a hurricane.”
Every major sector added employees, including manufacturing, where there has been evidence that the tariffs are starting to bite. Hispanic unemployment hit a new low of 4.4 percent.
“This is the best labor environment in over a decade,” said Joseph Brusuelas, chief economist at RSM U.S., an international consulting firm.
African American unemployment, at 6.2 percent, is close to an all-time low, although it still remains nearly double the white unemployment rate.
The wage gains are coming at a time of record profits for U.S. companies after Trump and congressional Republicans enacted the biggest corporate tax rate cut in the nation’s history.
Although business profits are at an all-time high, the share of that income going to workers hangs near the lowest levels since the government began tracking it in the 1940s.
“We need to see stronger wage growth for a lot longer for workers to be able to claw back the labor share of corporate-sector income and for workers to really feel those benefits in their paycheck,” said Elise Gould, senior economist at the left-leaning Economic Policy Institute.
Hassett predicted strong wage growth would “move even higher” than 3.1 percent next year as companies use their tax savings to invest more in factories, machines and other items that make workers more productive.
But the latest government data on business investment was weaker than expected, a sign companies might be holding off on spending because of uncertainty on trade.
Analysts say the robust job growth streak took off in 2014 and has largely kept pace since. The average number of monthly job gains in the final two years of the Obama administration was 211,000, according to data from the Bureau of Labor Statistics. The average so far under Trump is 196,000, a solid number given the low unemployment.
The country has 7.1 million job openings, a record high, the Labor Department announced Tuesday.
“Average wages are finally starting to pick up, especially for some lower-skilled positions,” said Andrew Chamberlain, chief economist at Glassdoor. “Maintenance workers, bank tellers, cashiers, cooks — employers are running out of workers for many of these roles.”
Health care, manufacturing, construction, transportation and warehousing fueled October’sparticularly strong job growth.
Employment at hospitals, nursing homes and other medical facilities surged by 36,000 positions.
Manufacturing jobs jumped by 32,000, with the largest gains stemming from goods production. Construction expanded by 30,000 roles, nearly half of which focus on residential homes.
Transportation and warehousing saw gains of 25,000, while leisure and hospitality recovered from September’s hurricane slowdown with 42,000 positions.
Some analysts have tied rising pay to moves by 18 states to increase their minimum wages at the start of the year.
Speaking Thursday at The Washington Post, White House economic adviser Larry Kudlow said he stands against that kind of policy at a national level. “My view is a federal minimum wage is a terrible idea. A terrible idea,” he said, claiming that pay restrictions hurts small businesses.
There is some concern that higher wages might fuel inflation if companies turn around and increase prices for consumers. But for now, inflation remains right around the Federal Reserve’s target of 2 percent. If inflation rises next year, the Fed would probably respond with faster interest rate increases, which have tended to cause markets and the economy to choke in the past.
It’s likely that the October wage figure was slightly inflated because the severe hurricanes last year ended up depressing wages. So when the Labor Department calculated the year over year change for wages last month, it looked like a bigger jump than normal. because last year’s number was low.
Still, economists say wages are trending slightly higher. “I don’t want to play down the optimistic story here. Things are getting better. Wages are firming on a nominal basis for workers,” said Ernie Tedeschi, head of fiscal analysis at Evercore ISI and a former economist in the Obama administration.
Job growth in the United States slowed considerably in September, largely because of Hurricane Florence’s devastating run through the Carolinas. About 313,000 people did not clock in at work due to the rough weather.
Federal economists revised September’s job growth down to 118,000 from 134,000.
Business falters amid severe weather, according to a Federal Reserve study . It can take months for economic activity to pick back up.
“You can’t work on a jobs site if it’s underwater,” said Robert Frick, corporate economist at the Navy Federal Credit Union in Virginia.