Total nonfarm payrolls rose by 336,000 in September, and the unemployment rate was unchanged at 3.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in leisure and hospitality; government; health care; professional, scientific, and technical services; and social assistance.
The real truth from this very strong unemployment report is that consumers in a full-employment economy will keep spending. Why? Because their wages are increasing faster than the inflation rate, which is now nearing the Fed’s 2 percent target.
Every sector except Information services added jobs, beginning with Leisure and Hospitality (96,000), Government (73,000), Education & Health (70,000), which is a sure sign that economic growth is picking up. The government also raised its estimate of job gains in August to 227,000 from 187,000, and July was revised up to 236,000 from 157,000.
This should indicate third quarter GDP growth estimates as high as 4 percent are accurate, double the first two quarters, yet average hourly wage growth is declining, probably because most new jobs are in the lower-paying service sector.
We can understand why consumers are a bit confused. They still feel good about the present but worry about higher prices and yet continue to worry about a possible upcoming recession, which is reflected in the Conference Board’s Consumer Confidence survey.
“September’s disappointing headline number reflected another decline in the Expectations Index, as the Present Situation Index was little changed,” said Dana Peterson, Chief Economist at The Conference Board. “Write-in responses showed that consumers continued to be preoccupied with rising prices in general, and for groceries and gasoline in particular.”
So why then the recession fears? I believe this is largely the fault of Federal Reserve officials who continue to confuse both the public and financial markets about their intentions when signs are now indicating that we can have higher economic growth and lower inflation.
Why is lower inflation possible? More job creation means more is being produced, giving consumers more choices with some help from newer technologies (such as AI?) that should boost labor productivity.
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment