The report is in, and June saw 287,000 more jobs created than was predicted. This turnaround from the almost depressing May numbers is so big that it brings the two-month average above pre-May predictions.
While new jobs are inherently a good thing for any economy, the circumstances around these numbers are some of the brightest economic news the U.S. has received in over a decade.
There are a number of things happening in the world that should have made this kind of growth impossible. These gains had to overcome Brexit, the strengthening of the U.S. dollar, a slumping Chinese economy and an ever shifting political atmosphere.
When the UK shocked the world by voting to leave the EU, stocks tumbled around the world. This is a pretty typical knee jerk reaction to an event with such high potential for stability, but American stocks rebounded pretty quickly. The jobs announcement helped solidify the return to confidence, and the S&P 500 is back to a net gain for the year so far.
With so many powerful global markets taking hits, the U.S. Treasuries are growing in appeal. They represent a stability that is becoming hard to find elsewhere. The British Pound and Euro have both dropped, and the result has been an increased demand in the USD, improving its buying power.
This makes U.S. based stocks all the more appealing as their gains are more meaningful. That makes investing in domestic trade more enticing for the hundreds of thousands of new job holders, further contributing to the cycle of growth.
Earlier in the year, Chinese markets began to freefall. Things don’t look too much better half way through the year. The Bank of China has slowed the pain by burning huge portions of its reserve, but it hasn’t been enough to completely mitigate the recession.
A large chunk of that reserve was in U.S. Treasuries. That the Bank of China can flood the market and we still see an increased value in the USD, general economic growth and this many new jobs is very encouraging.
You would be hard pressed to find someone anywhere on the planet who wouldn’t agree that this is the craziest election cycle in U.S. history. The inescapable uncertainty of so many factors in this election would normally spell trouble for the economy and job growth.
That so many jobs were created in the midst of the shenanigans suggests economic strength beyond any early year predictions. As crazy as things might get politically, there is now good reason to hope for a strong economy regardless.
While the job surge overcame worldwide issues, a closer look at the domestic side of things is revealing.
In May, the jobs report was the most abysmal seen in several years. While part of that was due to the large-scale Verizon strike, the numbers were still enough to make many an expert worry that the growth period was coming to a close. It turned out that May was just an outlier, and with the June report, the two months average to a predictable 161,500 jobs per month.
It might feel counterintuitive, but the fact that unemployment has increased by 0.2 percent in spite of so many new jobs is a good thing. One of the major contributions to May’s dismal numbers was the lowest unemployment seen in a very long time.
Excessively low unemployment numbers actually make it harder to add jobs. June’s unemployment increase should help the country sustain job growth.
The only thing that could make 287,000 new jobs even better is an overall wage increase. That’s exactly what has happened, as wages continue to grow slowly and steadily.
Major job suppliers like Wal-Mart and Starbucks have committed to large, long-term increases, and many other members of the foodservice and hospitality industries are being pushed to follow suit. This means the new jobs are putting even more money back into the economy than they would with slower wage increases.
While the Fed still seems reluctant to follow through on its 2015 promises to raise rates this year, the economic resilience shown so far this year may change that by December.
While a raise is not necessarily something investors want to see, it is a sign that the economy is sturdy. Growth in the face of so many factors that would normally spell certain recession is outrageously encouraging. Really, there may never have been a better time to be a consumer or investor in the U.S.
Regards,
Ethan Warrick
Editor
Wealth Authority
