Resilient job market shields Trump from trade blowback

Resilient job market shields Trump from trade blowback
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A resilient job market and steady consumer spending are helping insulate the U.S. economy from a dangerous mix of global threats, providing some protection to President TrumpDonald John TrumpTrump faces high stakes in meeting with Erdoğan amid impeachment drama Democrats worry they don't have right candidate to beat Trump Trump threatening to fire Mulvaney: report MORE amid criticism of his ongoing trade war with China.

The October jobs report and the government’s third-quarter GDP estimate, both released this week, were far better than economists had forecast. The U.S. added 128,000 jobs last month, exceeding the 85,000 projected by analysts, and the economy expanded at a 1.9 percent rate from July through September, faster than the 1.6 percent expected by Wall Street.

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“Wow, a blowout JOBS number just out,” Trump tweeted Friday morning, citing an inflated figure dismissed by economists. “This is far greater than expectations. USA ROCKS!”

While employment gains and economic growth have slowed considerably from 2018, the consumer side of the economy has yet to be hit hard by the steep declines in business investment, manufacturing and exports stemming from Trump’s trade policy.

Still, economists warn that a slew of risks — including pending tariffs on Chinese goods and auto imports — could lead to protracted slowdown next year, a development that would undoubtedly weigh heavily on Trump’s reelection prospects. A persistent industrial recession also poses a threat to the president’s popularity in crucial swing states where he has pledged to revive manufacturing jobs.

But without a significant downturn in hiring or consumer spending, the economy may hold up well through much of the 2020 election season.

“Right now, the economy is just slowing to its long-term trend,” said Joseph Brusuelas, chief economist at RSM, an audit and consulting firm. “From a financial and economic point of view, that's fine. We have low unemployment, low inflation, and growth in line with trends.”

Trump’s reelection campaign depends largely on whether the economy can extend its record growth stretch. While Trump remains widely popular among his base, a strong economy could help broaden that support.

The 3.6 percent unemployment rate is hovering close to a 50-year low, leading to high levels of consumer confidence even amid 2020 recession fears. Steady consumer spending, supported by a strong job market, has in turn helped power the U.S. as its global partners reel from contracting economies.

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“Given that we currently need less than 100,000 jobs per month to break even...this level of jobs growth is firmly in expansionary territory and, if sustained, will continue to nudge the unemployment rate down,” wrote Heidi Shierholz, senior economist and policy director at the Economic Policy Institute, a left-leaning think tank.

Further labor market gains tight combined with strong consumer confidence, would likely to postpone the next recession until after the 2020 election.

Federal Reserve Chairman Jerome Powell argued Wednesday that after three consecutive rate cuts this year, the U.S. was likely on track to support steady growth and job gains.

“Consumers are doing well and are focused on the good job market and rising incomes,” Powell said. “That’s the thin pushing the economy forward and it doesn't seem to have been affected, so far, by weakness in the other areas.”

Even so, economists warn that the deteriorating global economy and the prospect of further Trump tariffs could quickly reverse years of steady job gains, plunging consumers into panic.

“This was a very solid report if you look only at the basic metrics,” said Jeoff Hall, managing economist at Refinitiv, a financial data and analysis firm. “We have skirted a jobs recession for all of 2019, but uncertainty continues to swirl for business owners.”

Despite progress toward a preliminary trade deal with China, tariffs on more than $100 billion in crucial Chinese consumer goods are set to take effect on Dec. 15. Trump is also nearing a November deadline to decide whether to impose potentially devastating tariffs on foreign vehicles and auto parts.

Trump has already imposed tariffs of up to 25 percent on more than $300 billion in Chinese imports, along with levies on foreign steel and aluminum. While those tariffs have raised costs for manufacturers and forced some U.S. business to shutter, they’ve so far done little to impact retail prices.

Brusuelas warned, however, that the new tariffs on Chinese goods will be “the first time Americans are going to really feel the pain of the trade war.”

The vast majority of Chinese imports subject to the December tariffs are essential clothing, household, and technology goods unavailable from other countries. And more consumers products from China subject to the September tariffs will soon hit the shelves of major American retailers with higher prices.

“To me, that's the likely tipping point between slower growth and a premature end of the business cycle,” Brusuelas said.