How can 339,000 jobs have been created in May when a recession is supposed to happen later this year? And the unemployment rate have risen to 3.7 percent from 3.4 percent last month, confounding all the pundits and many bankers?
Because we are about to enter another industrial age, using a term coined by Christopher Smart in a recent Barron’s Magazine article, a former Senior Treasury official who sees a “golden age of industrial policy” in upcoming years due to a new coordination of economic policies among western developed countries to combat global warming and a new cold war.
The increase in hiring was in all sectors except for manufacturing—in its own recession—and information services. The increases were led by Education & Health (97,000), followed by Professional businesses (64,000). Hiring was also strong in government (56,000), and bars and restaurants (33,000). Employment even rose by 25,000 in construction, a sector that has struggled to find workers, as the real estate sector has also been growing again.
Employment gains in April and March were a combined 93,000 higher than previously reported. The economy averaged a robust 283,000 new jobs in the past three months, but that’s down from 344,000 in the same period in 2022.
The new debt ceiling agreement might give us some of the answer to the May jobs report. It preserved both the Infrastructure and Jobs and Inflation Reduction Acts, for starters and lifted the debt ceiling for another two years; until after the 2024 election.
The Inflation Reduction Act (IRA) is the third piece of legislation passed since late 2021 that seeks to improve US economic competitiveness, innovation, and industrial productivity. The Bipartisan Infrastructure Law (BIL), the CHIPS & Science Act, and IRA have partially overlapping priorities and together introduce $2 trillion in new federal spending over the next ten years.
I said last week after a sputtering start, it looks like the U.S. economy is picking up steam. First Quarter GDP growth was revised upward from 1.1 to 1.3 percent in the BEA’s second estimate and Q2 growth is expected to be around 2 percent.
The slump in manufacturing activity may not last long, either. Orders for U.S. manufactured goods jumped 1.1 percent in April largely because of the military, but business investment also rose sharply in a positive sign for the economy. Manufacturing output had been shrinking in the last six months.
And I mentioned in an earlier piece that business investment rose a sharp 1.4 percent. What are corporations seeing that induces them to invest more? They are also expecting economic growth to improve.
It really seems to me that this is a prosperity train leaving the station that will be difficult to stop, whatever the continuing Federal Reserve interest rate policy. There are too many players that want to see a better world ahead.
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment