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Markets tumble again despite strong wage growth – POLITICO


In a week where the stock market has already suffered considerable turmoil due to anxiety about Trump’s trade policies, Friday’s news may create more. | Spencer Platt/Getty Images

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Strong wage growth in November reaffirmed the durability of President Donald Trump’s economy but did little to settle turbulence in a stock market roiling from the administration’s trade policies.

The Labor Department on Friday reported 155,000 new jobs in November, down from 237,000 in October but still strong by historical standards. Unemployment remained near historic lows at 3.7 percent.

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But the real headline was November’s rapid wage growth. Average hourly earnings were up 3.1 percent over the previous year, matching October’s strong gain, which was the largest single-month rise since 2009. The November wage figure may signal that rising wages were not a momentary blip but a sustained trend as the labor market reaches full employment.

The good news for workers risked creating more bad news on Wall Street. Signs of incipient inflation, combined with continued strong job growth, increase the likelihood that the Federal Reserve will raise interest rates later this month.

Early market signals were mixed. After an uptick at 9 a.m., the Dow Jones industrial average was plummeting by mid-morning, perhaps in recognition that Fed was unlikely to change course.

Trump’s advisers nevertheless accentuated the positive.

“President Trump’s policies continue to fuel strong and steady job growth,” Labor Secretary Alexander Acosta said in a statement. “Wage gains remain steady. Paychecks are growing.“

Some left-leaning groups seconded Trump — who has repeatedly blamed the Fed for economic stumbles — and called on the Fed to hold off.

“This morning’s #JobsReport provides more evidence that the Fed should alter its course and not raise rates when it meets later this month,” tweeted Elise Gould of the Economic Policy Institute.

The report gives Trump some good news to balance against General Motors’ recent announcement that it will close five plants in key swing states. Predictions that Trump’s trade moves will dampen job growth have yet to prove true at the national level — though economists say that could change.

“CEOs and CFOs are all talking about how the tariffs are hurting them,” said Dan North, chief economist at Euler Hermes North America. “It hasn’t started flowing through with employment. We’re definitely seeing it flow through in profits, though.”

But Trump’s advisers are beginning to worry that a recession in 2020 could thwart his reelection chances. Independent economist say that’s a real possibility, citing not only the volatile market but also longer-term indicators such as interest rates on Treasury bonds.

"They know it could be a very dangerous situation if the market volatility is hurting workers in key battleground states through their pensions, investments, you name it,” said one Republican close to the White House. “The concern is probably at a DEFCON 3 at this point, but it will definitely spike in 2019 if there’s no real solution [to the trade dispute with China] during this 90-day period.”

The last two one-term presidents, Jimmy Carter and George H.W. Bush, campaigned for reelection either during or soon after economic recessions. Ronald Reagan, Bill Clinton, George W. Bush, and Barack Obama all won re-election during economic expansions.

If the economy has indeed reached full employment, that has yet to have much effect on labor force participation rate, which at 62.9 percent in November remained close to its lowest level since the 1970s. That’s of little help to businesses struggling to fill a shortage of workers.

“With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls,” Mark Zandi, the chief economist at Moody’s Analytics, said in a statement.

Nancy Cook contributed to this report.

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