On Friday, the Bureau of Labor Statistics reported a major job spike of 235,000 in February, dropping the unemployment rate to 4.7 percent. According to CNBC, the good news didn’t stop there: average hourly earnings bumped 2.8 percent, construction jumped by 58,000 jobs, and manufacturing added 28,000 jobs. The U6 unemployment rate, which includes the underemployed, is now at a recent low of 9.2 percent. Fully 326,000 new full-time positions were added to the market.
So, why the boom?
Analysts say that Trump’s election is indeed the reason. But it’s not just Trump’s election – it’s the fact that the Republicans hold Congress as well, and are looking to pare back regulations. While the media focus on Trump’s Twitter imbecilities, the markets are far more focused on the fact that a predictable economic backdrop has finally been created for the market.
Now, a few caveats. The labor force participation rate decreased in February, but it remains historically weak, at just 63 percent. We’d have to gain nearly 10 million new jobs in order to maintain this unemployment rate with the same labor force participation rate we had in 2000.
It’s important to recognize that despite the weakness of President Obama’s economic recovery, Trump did inherit a growing economy, and one with significant breakout potential. You can’t ignore the same unemployment statistics you used to rip Obama and retain credibility; you can’t cite the stock market as evidence of Trumpian genius if you ignored it for eight years under Obama. Trump and his allies have touted the stock market jump since his election, but the reality is that the stock market boosted significantly and continuously during the Obama years. President Obama’s recovery was the weakest in modern American history, but that’s because his job-killing regulations and penalties on investment drove people to sock away money and invest in stock buybacks rather than investing it in new research and development or hiring.
How robust is the market’s confidence in Trump? We’ll find out in the next few months as the Federal Reserve hikes interest rates, and as Congress struggles to move forward with a tax restructuring. We’ll also find out if the systemic problems plaguing the job market – new technology replacing jobs, the movement toward the service-based economy rather than manufacturing – somehow bucks all the long-term trends for the last decade and a half. That’s unlikely in the years to come.