What Recession?

Remember way back in August, when economists and investors were gnashing their teeth about a looming recession? For the last three months, economic data have mostly improved, underscored by the just-released boffo November jobs report. The nation added 266,000 jobs, including 41,000 GM workers, who returned to work after a strike. Job growth has averaged 180,000 per month thus far in 2019 down from the average monthly gain of 223,000 in 2018, but still strong for the eleventh year of an expansion.

The unemployment rate edged down to match a 50-year low of 3.5 percent. The jobless rate has remained at or below 4 percent for 21 straight months, the longest such stretch since the 1960s. The broader rate slid to 6.9 percent, matching a post cycle low in August, the lowest reading since December 2000.

Average hourly wages were up 3.1 percent from a year ago, below the 3.4 percent peak hit last February, but a slight improvement from the previous month. More importantly, worker pay is more than a full percentage point ahead of the overall inflation rate, which may explain why consumers say they are feeling jolly this holiday season.

While manufacturing recouped the jobs lost in the previous month (most of which were attributed to the GM strike) jobs in the sector have mostly stalled out in 2019 due to the impact of the trade war with China - average hours worked in manufacturing has fallen to its lowest level in eight years and the number of people employed in the sector also remains well below where it was in 2008.

US-CHINA TRADE:

There were hints that the rapidly approaching December 15th date when the U.S. is set to impose an additional 15 percent tariff on $156 billion of Chinese imports might get pushed back again. As a measure of goodwill, China said it would exempt U.S. soybeans and pork from the current tariff regime. Then Trump economic advisor Larry Kudlow noted that there are “no arbitrary deadlines” for completing the smaller, “Phase One” trade deal with China. Given that the December 15 tariffs would impact consumer goods, the delay would be welcome news.

FEDERAL RESERVE:

The November employment report was the last big economic data point before the Fed’s final policy meeting of the year. With evidence of solid job growth and three interest rate cuts behind them, Fed officials are likely to remain on the sidelines not only at this meeting, but also for the foreseeable future. Of course this may beg the question, did the Fed have to cut as much as it did? According to economist Joel Naroff, Fed Chair Jerome Powell cited concerns about the economy as a rationale for cutting rates, “Yet the economy never stumbled.  So, now we have rates that leave minimal room for the Fed to ease further and the real softening, if it is to come, is still out there.”