The July jobs report and the next few after it will be all about November.
Economists project that the Labour Department’s report out on Friday will show that the labour market remains in good, steady shape.
And what the data say about how the economy is doing will become increasingly significant as we head closer to the November election.
Via Bloomberg, here’s what Wall Street is forecasting:
- Nonfarm payrolls:+180,000
- Unemployment rate: 4.8%
- Average hourly earnings month-on-month: +0.2%
- Average hourly earnings year-on-year: +2.6%
- Average weekly hours worked: 34.4
“In general, voters tend to flock toward reform and bold plans during times of uncertainty,” wrote Andrew Chamberlain, chief economist at Glassdoor, in a preview.
If data start to show growing cracks in the economy, particularly in a key area like the labour market, Republican presidential nominee Donald Trump would get more ammo to argue against four more years of a Democratic president.
Trump is already doing this. On Tuesday, he said at a rally in Virginia:
“The numbers are getting worse and worse all the time. If they get real bad, I hope it happens fast, so I don’t have to — they will all blame me. You’ll end up winning and your first day, the economy crashes because of some incompetent people before me.”
Last Friday, we learned via an advance estimate that the economy grew by 1.2% in the second quarter, less than expected, as business investment slumped. This is the kind of number that Trump refers to.
On the flip side, “good news pushes voters in favour of staying the current course,” Chamberlain said. “For this reason, pollsters will be watching the next few jobs reports closely as we inch toward Election Day.”
Pollsters like Nate Silver at FiveThirtyEight are incorporating new economic data into their predictions of who will win.
But what’s irrefutable is that the labour market is right now stronger than the comparable periods in the last two elections, Chamberlain noted.
The unemployment rate is at 4.9%. It was 8.2% in June 2012 and 5.6% in June 2008, seven months into the recession. The economy gained 287,000 jobs in June 2016, versus a loss by 165,000 in the same period in 2008. Job openings are at a record high of 5.5 million.
On the downside, the labour force participation rate has continued to fall, although this is largely because of retiring baby boomers.
“After seven years of consistent growth, the next resident of the White House stands to inherit one of the most robust job markets in a generation,” Chamberlain said.
‘A hiring rebound back towards trend’
The pace of job creation plunged to 11,000 in May — a weak number even adding back the 35,000 Verizon workers who were on strike.
June brought a strong rebound, and July should return the pace “towards trend,” said Wells Fargo Senior Economist Sam Bullard.
The trend has slowed this year. In part, it’s because the economy is approaching full employment amid the lowest unemployment rate in eight years.
“Without a continued rebound in the labour force participation, gains should remain strong enough to further reduce the unemployment rate,” Bullard said.
Meanwhile, wage growth is gradually rising as the labour market gets tighter.