News and Commentary

Wow: Unemployment Rate Hits Lowest Point In A Half Century

On Friday, a positive April jobs report brought the economy’s unemployment rate down to 3.6% — making for the lowest mark in a full half century. Per The Wall Street Journal:

American employers picked up the pace of hiring in April and the unemployment rate fell to a half-century low, adding to signs of healthy U.S. economic growth as the expansion approaches its 10th birthday.

Private-sector workers saw solid wage gains, with average hourly earnings up 3.2% in April from a year earlier, matching the prior month’s increase.

The decline in the unemployment rate, however, wasn’t entirely positive. It in part reflects that fewer Americans were looking for jobs. The U.S. labor force shrank by nearly 500,000 people. Those figures tend to be volatile from month to month, but the share of Americans with jobs or actively looking for work fell in April for the second straight month to 62.8%.

As the Journal also notes, the April jobs numbers were more auspicious than most economists had expected. Interestingly, however, the April report showed a lower overall labor market denominator, which may have helped account for the remarkably low unemployment rate. As the Journal observes, “[t]he share of adults in their prime working years who are employed or seeking jobs is significantly below the peak reached in 2000.” Economists and policymakers will be divided on the reasons for this, but increased automation and an increasingly lavish welfare state are but two possibilities.

Commentator Daniel Horowitz also picked up on the lower labor market total, tweeting: “Trying to figure out how there are suddenly 646k MORE people NOT in the labor force than last month. That’s clearly why the rate dropped even though there are 103k fewer people employed and the overall population grew by 156k. Definitely, good report in general, but bizarre.”

The stock market mildly rallied on the news; as of midday, the Dow Jones Industrial Average was up slightly under 1%.

CNN notes some of the other positive highlights from the April report:

Indications of strength of the labor market could be found throughout the report. The average hourly wage was up 3.2% compared to a year ago, well above the 1.9% rise in prices, meaning real gains in the paychecks of average workers.

Some of the strongest sectors for hiring included the construction industry, which added 33,000 jobs, and health care, which added 27,000 jobs. Restaurants and bars added 25,000 jobs.

The soaring economy and jobs market ought to have positive implications for President Trump’s presidential re-election campaign. Historically, most incumbent presidents seeking re-election have fared well when fortified by the tailwinds of a thriving economy. James Carville’s famous political adage, “It’s the economy, stupid!” has often carried real weight when it comes to voters’ decision-making. Indeed, this week, Democratic strategist Mark Mellman took to The Hill to warn his fellow Democrats that the 2020 presidential election must be fought on political terrain that extends beyond the economy:

Last week, one of my very smart, and very distinguished, colleagues told The Washington Post in no uncertain terms that the 2020 “election is going to be about the economy.”

Unless something changes dramatically, Democrats better hope my friend is wrong, because that’s an election we will likely lose. …

If politics were merely a reflection of economics, and Trump was a normal president (he’s not), his approval rating would be 10 to 20 points higher than it is.

Something’s holding his approval rating far below its “natural” level.

Instead of attacking uphill, let’s figure out what’s already holding Trump down and focus 2020 on that.

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