President Trump hailed better than expected job growth with an “I’ve only just begun” tweet.
Over the past 2 months, 400,000 jobs have been added to the US economy.
Wage growth is still lacklustre
It’s remained at a dismal 2.5%.
And with Americans preferring to spend their wages on eating/drinking out, many of the created jobs were low paid, with 50,000 of them in restaurants and bars.
Low wage growth prevents the Federal Reserve (Fed) reaching its 2% inflation target.
Without inflation increasing, the Fed may struggle to raise interest rates further, for fear of creating deflationary pressures. It may also be delayed in selling its large debt portfolio it created post 2007. This programme, along with lower interest rates, injected lots of money into the economy. Selling off this debt will help the government negotiate a new debt ceiling.
Yet there is hope: Goldman Sachs believes that when America reaches full employment, employers will start to compete for workers and up pay.
Look at manufacturing.
Manufacturing, as a share of the economy, is beginning to fall.
This ups the pressure on Trump to match rhetoric with action, by getting a good outcome from the North American Free Trade Agreement talks.