There were fresh reasons to worry about the economy this week, and President Trump continued to jar investors’ nerves.
But forget about all that. Employers added an astonishing 312,000 new jobs in December, obliterating economists’ expectations. Most job reports, even the strong ones, contain a few worrisome signs. But this one didn’t. Wages grew by an annual average of 3.2%, the most since 2009. Job gains covered virtually every sector, with no signs of weakness. Even better, Americans who had given up finding a job started to look again, which is why the unemployment rose from 3.7% to 3.9%: More people now count as unemployed because they’ve stopped being economic dropouts.
The government also revised upward the job gains for October and November, with the three-month average hitting 254,000. Some economists have doubted such robust job creation is even possible with so many people already working. This amazing pace of hiring buries, for now, the idea that a recession is around the corner. And it contributed to an impressive rebound in stocks following a disturbing loss.
For these reasons, this week’s Trump-o-meter reads BIGLY, our second-highest rating.
Trump has been scoring poorly on the Trump-o-meter of late. His trade war with China has become a chronic stock-market depressant. His attacks on Federal Reserve Chair Jerome Powell over modest monetary tightening are petty scapegoating liable to backfire. His government shutdown is sapping confidence. And all this is happening as the economy appears to be slowing.
Or is it? Job reports tell us what happened in the past, and most economists still think hiring and economic growth will be weaker in 2019 than they were in 2018. But such forecasters also thought job growth in December would be around 175,000. That consensus estimate was 78% too low.
The stock-market surge that followed the December jobs report might not last. Such strong hiring strengthens the case for the Federal Reserve to keep hiking interest rates, while investors have begun to think the Fed will slow the pace of hikes and maybe even cut rates in 2019. So investors expecting the Fed to ease off might be guessing wrong. We won’t know until at least March, when Fed policymakers are next expected to act or explain why they didn’t. There will be two more job reports by then, and all kinds of other news nobody can predict.
For now, the strong job market is good news for workers. Trump doesn’t deserve all the credit, since we’re now in the 10th year of an economic recovery. But he has something to brag about, and it sure wouldn’t hurt if he would score in the upper half of the Trump-o-meter more frequently.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman