Forget Fire and Fury and focus on what matters: solid US jobs, wages and consumer spending
Michael Wolff’s explosive book may have dominated the news but the real story is that US economic data remains solid. And that’s good news for all of us
Michael Wolff’s Fire and Fury: Inside the Trump White House might have been dominating the US news cycle in recent days but markets should be more interested in a set of economic data which suggests a still healthy American economy which is underpinning a broader global economic expansion.
Even as Wolff’s scathing representation of the Trump presidency – though dismissed in a tweet as “boring and untruthful” by the US president himself – was hitting bookstores on Friday, data from the US Bureau of Labour and Statistics showed that “job gains have averaged 204,000 over the past three months.”
There can be no argument over the fact that, for whatever reasons, the American consumer is again spending money
Admittedly, December’s 148,000 increase in non-farm payrolls was below the 190,000 rise forecast by economists polled by Reuters but the US unemployment rate remained at a 17-year low of 4.1 per cent and average hourly earnings rose 2.5 per cent in December year-on-year, up from November’s 2.4 per cent.
It should also be noted that the average hourly earnings increase didn’t take into account any impact from the tax legislation signed into law by Trump just before Christmas or, at the margin, the effect of individual states and cities raising the local minimum wage from the start of 2018.
In the latter case, as the US National Employment Law Project has pointed out, 18 states and nine cities raised their statutory minimum wage as of January 1, which should, according to the US’ Economic Policy Institute, provide “over US$5 billion in additional wages to 4.5 million workers across” the United States.
There’s also an argument that rises in minimum wages at times of very low unemployment will then encourage higher wages as a whole as the available labour force exploits the relative lack of competition in the jobs market to force employers to pay more for workers.
The combination of the low unemployment rate and the uptick in hourly earnings should keep the Federal Reserve on course for a further rate increase in March. In the meantime, Friday saw the Dow Jones Industrial Average, the Nasdaq Composite and the S&P 500 all powering higher.