No shocker the president quickly hyped up the September jobs report numbers, specifically the lowest unemployment rate in 50 years. Hey, he has had a bad week or two — terrible reads on manufacturing and yawning talk of impeachment. But investors would be wise to not suck up too much of Trump’s economic hopium.
“Breaking News: Unemployment Rate, at 3.5%, drops to a 50 YEAR LOW. Wow America, lets impeach your President (even though he did nothing wrong!),” Trump tweeted just moments after the new jobs figures hit the newswires on Friday.
But going beneath the hood of the latest on jobs from the U.S. Labor Department, you find a U.S. economy slowing down perhaps faster than most investors appreciate. For starters, private payrolls — which excludes government hiring — rose by 114,000, slightly missing Wall Street estimates. Morgan Stanley economist Robert Rosener astutely points out that August and July payrolls are now reported to have increased by 122,000 — that brings the three-month private payroll growth number down to 119,000 from 135,000.
Rosener says the jobs growth trend has “slowed noticeably.” Keep in mind this slowdown has come prior to the full effect of Trump’s tariffs on China hitting companies — that’s probably lurking for October and into year end.
Blame the spreading effects of that U.S. trade war with China on Corporate America, blame seasonal distortions or workforce demographic shifts. Whatever the case, the fact is the U.S. economy is losing momentum — as seen by several recent jobs reports — and is not nearly as robust as team Trump suggests or as implied by a 3.5% unemployment rate.
The weakness in private payrolls in September bled into average hourly earnings, too. Average hourly earnings fell 0.4% on the month, also coming in a shade below Wall Street forecasts. The miss on average hourly earnings brought the year-over-year average down to 2.89% growth, the lowest since July 2018.
UBS’ macro team appear to be the only bunch on the Street that are keeping it real on the economy right now.
“We have been expecting the economy to slow to near-recession in response to the tariffs and their particular effects on manufacturing, energy, and retail sectors, which were already faltering. This week’s data suggests that the weakening in activity is coming sooner and may be greater than we have been expecting,” says UBS economist Samuel Coffin.
Investors would be wise to heed that call from UBS. Some certainly have already done so — a strong bid post the jobs report has continued in the safe-haven 10-year Treasury and various consumer staples stock such as Coca-Cola.
Trump should give UBS a perfect call, too, to get a sense on what is really going on out there in the economy — mostly because of his own masterful work.