JUNE JOBS JUMP: For the month of June, the U.S. economy added 224,000 new jobs. The unemployment rate increased from 3.6% to 3.7% due largely to about 300,000 more people joining the job market. Wages had a six cent per hour gain, and currently wages are about 3.1% higher than a year ago.
JOBS REPORT MIGHT HAVE BEEN TOO GOOD: When the better-than-expected June jobs report was announced, stocks fell. Fear gripped investors who are counting on the Fed lowering rates later this month, and if the economy looks too good, the Fed will not. Despite Friday’s set back, stocks had a positive shortened week due largely to the momentary trade truce between the U.S. and China.
RECORDS ARE MEANT TO BE BROKEN: According to the National Bureau of Economic Research, which is considered the official arbiter of recessions and economic expansions, the current expansion began in July 2009. It has run exactly 10 years, or 120 months, matching the 1990s expansion–see table below:
However, this economic recovery has also been the slowest since at least WWII, according to data from the St. Louis Federal Reserve. For example, starting in the second quarter of 1996, U.S. gross domestic product, the broadest measure of economic growth, exceeded an annualized pace of 3% for 14 of 15 quarters. It exceeded 4% in nine of those quarters (St. Louis Federal Reserve).
Growth was much more robust in the 1960s, and we experienced a strong recovery from the deep 1981-82 recession.
LACK OF EUPHORIA; THE SILVER LINING?: Economic booms and long-running expansions tend to encourage risky behavior. People forget the lessons learned in prior recessions and overextend themselves. Consumers can take on too much debt. Businesses over-invest and build out too much capacity. We saw euphoria take hold in the stock market in the late 1990s and speculation run wild in housing not too long ago. That brings us to the silver lining of the lazy pace of today’s economic environment. Slow and steady has prevented speculative excesses from building up in much of the economy. In other words, a mistaken realization that the good times will last forever does not seem to have taken hold in today’s economic environment. Does that mean the inevitable recession will be milder?
CAN WE POSSIBLY HAVE MORE THAN 10 YEARS OF GROWTH?: Australia is enjoying its 28th straight year of growth. Canada, the U.K., Spain and Sweden had expansions that reached 15 years and beyond between the early 1990s and 2008. Without the Sept. 11, 2001 terrorist attacks, the U.S. might have experienced well over ten years of uninterrupted growth during that same period.
CAN WE POSSIBLY HAVE MORE THAN TEN YEARS OF GROWTH?: https://www.nytimes.com/2019/04/06/upshot/australia-lessons-economic-miracle.html; https://www.wsj.com/articles/after-record-long-expansion-heres-what-could-knock-the-economy-off-course-11559591043?mod=searchresults&page=1&pos=1
RECORDS ARE MEANT TO BE BROKEN: https://www.wsj.com/articles/after-record-long-expansion-heres-what-could-knock-the-economy-off-course-11559591043?mod=searchresults&page=1&pos=1; St. Louis Federal Reserve, NBER.
JUNE JOBS JUMP: https://www.calculatedriskblog.com/2019/07/june-employment-report-224000-jobs.html
JOBS REPORT MIGHT HAVE BEEN TOO GOOD: https://www.wsj.com/articles/global-stocks-waver-ahead-of-u-s-jobs-report-11562313342