During last year’s presidential campaign, Donald Trump and his supporters predicted an economic boom if he won the White House; his critics warned of a recession. Instead, nearly six months into Trump’s presidency, the U.S. economy is … fine. Consumers report being more confident, but their actual spending hasn’t accelerated. The stock market has surged, but key industries, including retailers and auto manufacturers, are struggling. Overall economic growth, sticking to its pattern of recent years, was slow early in the year but has picked up a bit more recently.
The latest jobs data, released by the Bureau of Labor Statistics on Friday, told a similar story. Employers added 222,000 jobs in June, more than in May and ahead of economists’ expectations. The unemployment rate ticked up but remained low at 4.4 percent. Average earnings rose a modest 4 cents an hour.
Overall, the June figures were improved from May, when decent headline numbers masked more troubling details. But neither month’s data did much to change the bigger picture: Years of steady job growth have succeeded in putting most Americans back to work after the Great Recession but haven’t yet translated into strong gains in workers’ paychecks. That was the overarching economic story under Barack Obama, and it remains the story under Trump.
It shouldn’t be too surprising that the economy hasn’t changed direction since the election. Presidents, despite their promises, have limited influence over the economy, especially in the short-term. And Trump, of course, has yet to enact the big policies on taxes, trade and other issues that are most likely to affect the economy, for good or ill.
The larger questions facing the job market have little to do with politics: How long can a record streak of job growth — now at 81 straight months — continue? When, if ever, will the falling unemployment rate spur faster growth in wages? And, crucially, how much more room does the job market have to improve?
On that last question, at least, Friday’s report was encouraging. In recent months, a growing number of economists have suggested the U.S. could be at “full employment,” the point at which essentially everyone who wants a job has one. But the solid pace of job growth suggests that isn’t the case. Instead, the strong job market appears to be pulling more Americans off the economy’s sidelines — the labor force grew by 361,000 people in June. There are signs the recovery is spreading to hard-to-reach corners of the job market: The unemployment rate dropped sharply in June for teenagers, African-Americans and Hispanics, and there is anecdotal evidence that companies are becoming more willing to hire people with criminal records.1
The downside of the expanding pool of workers is that it puts less pressure on employers to raise pay. Economists have repeatedly predicted that the low unemployment rate would lead to wage gains as companies compete to retain employees. But there has been little sign of that happening. Average hourly earnings in June were up 2.5 percent over the prior year. That’s ahead of inflation, which is averaging about 2 percent per year, but it’s not enough to reverse years of anemic wage growth and actually represents a slowdown from late 2016.
The good news from Friday’s report, then, is that the recovery in the job market is spreading rather than slowing. The bad news is that many workers are still waiting on their long-delayed pay raises. They are no doubt hoping that the clock doesn’t run out on the recovery before they get them.
Here are a few more observations from Friday’s report:
A gradual slowdown: The government revised up its estimates of job growth in April and May by a combined 47,000 jobs. The economy has averaged 180,000 new jobs per month over the first half of 2017, down a bit from the 193,000-job average from the previous six months but essentially unchanged from the first half of 2016.
Over the somewhat longer term, the pace of job growth has slowed a bit from the torrid pace of 2014, when the economy added 250,000 new jobs per month. But some slowdown was probably inevitable as the huge pool of workers displaced by the Great Recession began to dry up. Employers have added more than 2 million jobs over the past year, a healthy pace by any measure.
A “good” increase in the unemployment rate: The government only considers people “unemployed” if they are actively searching for work. That means the unemployment rate can rise for bad reasons (because people lost jobs) but also for good ones (more people started looking for work). June’s increase fell into the latter category: The labor force grew as more people started looking for work. The so-called participation rate — the share of adults either working or looking for work — rose a tenth of a percentage point, partially reversing declines in April and May.
One way to overcome the muddy definition of unemployment is instead to focus on how many people are working. The rate of employment among adults ages 25 to 54 — an age range chosen to avoid the effects of retiring baby boomers — rose a tenth of a percentage point to 78.5 percent in June. That’s up substantially from a low point of 74.8 percent in the early days of the economic recovery, but still below the 80 percent mark when the recession began.
Retail rebound: Steep job losses in the retail sector in recent months have contributed to fears that Amazon and other online sellers are doing permanent damage to a key source of employment for less-educated workers. In June, however, retailers added 8,100 jobs, the first increase since January. (A similar small gain in April was wiped out by subsequent revisions, something that could happen again.) Still, the sector has lost 36,000 jobs so far this year.
Other industries posted mixed results in June. Manufacturing employment was essentially flat, and automakers cut jobs for the third straight month. But the mining sector, which includes oil and gas producers, continued its recent rebound after shedding jobs in 2015 and 2016. The health care industry added 59,100 jobs, continuing a long trend of strong growth.