Donald Trump’s presidency began the way Barack Obama’s ended: with steady hiring, low unemployment and rising wages. But that’s before any of Trump’s controversial economic policies have had the chance to have an impact.
U.S. employers added 227,000 jobs in January, the Bureau of Labor Statistics said Friday. That’s more than economists were expecting and represents the best month of job growth since September. Average earnings rose a modest 3 cents an hour in January and are up 2.5 percent over the past year. The unemployment rate — a statistic that Trump frequently maligned on the campaign trail — ticked up to 4.8 percent mostly because more people entered the labor force, a sign of confidence in the economy.
Friday’s figures have been widely described as “Trump’s first jobs report.” That isn’t quite accurate: The report is based almost entirely on data from before Trump took the oath of office. Still, the numbers reflect hiring and firing decisions made in the immediate run-up to inauguration, when executives were weighing the likely effects of Trump’s policies.
There is some evidence that Trump’s chaotic first weeks in office have given some investors and business leaders pause. The stock market, which rallied after Trump’s win on Election Day, has stumbled this week. (Markets were up Friday morning following the report.) CEOs in several industries have felt pressure from customers to speak out against Trump’s policies, including his executive order limiting travel for people from several countries, while at the same time trying to avoid drawing Trump’s ire.
Working in Trump’s favor, however, are an economy and a job market that remain on fundamentally sound footing. January’s job growth was broad-based, with nearly every major private industry adding jobs. The unemployment rate, by any definition, has fallen to a level most economists consider essentially normal, although there is some disagreement over how much further it can fall. And most importantly, wage growth, which was anemic for much of the recovery, has finally been showing signs of acceleration.
Interestingly, January’s wage growth was partly the result of higher minimum wages that took effect in cities and states across the country on Jan. 1. Average earnings in the leisure and hospitality sector, which employs the majority of minimum-wage workers, rose 8 cents an hour in January. Trump has equivocated on the minimum wage, but his nominee to run the Labor Department, fast food CEO Andrew Puzder, is an outspoken critic of minimum wage hikes and related policies.
Beyond the minimum wage, it will take time for the economy to feel the effects of Trump’s policies. (Besides, presidents’ influence over the economy, particularly in the short term, is often overstated.) But it will be worth watching how the sectors that Trump emphasized during his campaign, such as manufacturing, fare early in his term. And Trump’s political fortunes could rest in no small part on whether his core constituency of white working-class voters sees economic gains.
In the meantime, here are a few more observations from Friday’s report:
Not a “fictitious” unemployment rate: On the campaign trail, Trump made no secret of his disdain for the unemployment rate, which he once called “one of the biggest hoaxes in modern politics.” One of his top economic advisers, former Goldman Sachs President Gary Cohn, once called the unemployment rate “very, very fictitious,” and Trump’s press secretary, Sean Spicer, recently refused to say what the rate is.
Trump and his advisers are wrong to suggest that the unemployment rate has been manipulated for political gain — the definition has been unchanged for decades, and numerous protections insulate the Bureau of Labor Statistics and other statistical agencies from political influence. But they are right that the rate can be a flawed economic indicator. The government’s official definition of unemployment excludes people who aren’t actively looking for work, which means some people who want jobs don’t count as unemployed.
January’s data is a case in point: The unemployment rate rose a tenth of a point from December, to 4.8 percent, but not because fewer people were working. Instead, the rate rose primarily because more people started looking for work, which is an encouraging sign for the economy. The so-called labor force participation rate, which measures the share of adults who are either working or actively looking for work, rose two tenths of a point, continuing a recent rebound from multi-decade lows.
To a large extent, however, Trump’s critique of the unemployment rate is out of date. During the recession and its immediate aftermath, millions of people gave up looking for work, rendering the unemployment rate deeply misleading. Now, however, even a broader definition of unemployment that includes people who have stopped looking for work shows a job market that has improved dramatically in recent years.
Mixed signals on future hiring: U.S. employers have added jobs for 76 consecutive months, the longest streak on record. January’s strong growth suggests that streak isn’t likely to end anytime soon. But it isn’t clear that hiring is likely to accelerate, either. The government revised down sharply its estimate for job growth in November (its December estimate was nearly unchanged), which can sometimes be a sign that hiring is slowing. Companies added more temporary workers in January, which can be an early sign of future hiring, but they didn’t ask existing employees to work more hours, a less positive sign.
Across-the-board job growth: January’s job gains cut across sectors. Generally low-paying industries such as retail and hospitality showed strong growth, but so did better-paying sectors such as finance and business services. Manufacturing, the industry Trump talked about repeatedly on the campaign trail, gained a less meaningful 5,000 jobs and has lost 46,000 jobs over the past year. But other blue-collar industries fared better: The construction industry added 36,000 jobs in January after a disappointing December, and the mining and logging sector (which includes oil and gas producers) held essentially flat after slashing jobs for much of 2016. The one major exception to January’s gains: the government, which cut 10,000 jobs. That isn’t likely to change under Trump, who imposed a federal hiring freeze in his first days in office and has promised to decrease the size of government.