If you believe there is a correlation between politics and the economy. The last official snapshot of the economy that came out Friday before Americans vote reminded me of James Carville’s words, “It’s the economy, stupid”.
Hiring is up. Wages are up. The total number of workers and job searchers are up.
But, the question remains: “Are voters feeling it?”
For years, we’ve been told since the Great Recession that the economy was improving ‘we just weren’t feeling it yet.’
On Friday, we heard the Labor Department report, employers added 250,000 jobs in October, extending a record streak of growth to 97 months. Many, including President Trump, have called it “tremendous”.
In Tucson, 9,300 jobs were gained from August 2017 to September 2018, according to the most recent labor report from October 18th.
In fact, total nonfarm employment over the month gain for Tucson was second only to Flagstaff MSA at 3.1%, at 2.4% net job gains. Higher than Arizona and the Phoenix-Mesa-Scottsdale MSA growth, both at 1.2%.
From September 2017 to September 2018, Arizona’s seasonally adjusted labor force level increased by 54,239 individuals, not an insignificant number.
Friday’s roundup also offered evidence that workers are not only feeling optimistic about job prospects but are actually finding work, which is why the jobless rate was unchanged at 3.7 percent even as employers hired more people. An estimated 711,000 people joined the national labor force last month alone.
As always, the monthly jobs report captures only a particular moment; the underlying trend is what’s important. That caution is particularly pertinent this time.
The back-to-back hurricanes in September and October may have distorted the data in unpredictable ways. A modest monthly wage gain of 0.2% nonetheless produced a surprisingly big 3.1% jump in annual growth. That was partly because of the unusual drop in pay in October 2017 after hurricanes. Yet even if the year-over-year increase was somewhat inflated, the underlying trends point to a pickup in wage growth.
Some analysts immediately saw warnings of inflation, while others said the pay increase should not bother policymakers at the Federal Reserve. “I don’t think it’s something the Fed should worry about,” Michelle Girard, chief United States economist at NatWest Markets, said. “Productivity growth is picking up, and workers should earn more. It doesn’t mean companies have to pass on higher wage costs to consumers. They can afford to pay them more.”
The Fed, which has increased rates three times this year from historically low levels, is expected to raise them again to 2.5 percent in December as a hedge against inflation.
In a call with reporters, Kevin Hassett, the chairman of the president’s Council of Economic Advisers, cited productivity growth as the explanation for higher wages, and not an overheating economy. He also took the opportunity to say that the president respects the Fed’s independence.
Manufacturing jobs — which have traditionally paid well and have been a focus of President Trump’s policies — increased by a healthy 32,000.
The economy has historically not played an outsize role in midterm elections, and this political season, border control, health care and Brett Kavanaugh’s nomination to the Supreme Court have gobbled up airtime and political ad space. Still, about three-quarters of registered voters say the economy is “very important” in determining their vote, according to polls conducted by the Pew Research Center. Among Republicans, that number is even higher at 85 percent.
We’ll have to wait until Tuesday night to see who is feeling the economy.
To learn more, see ADP Employment October Report.