While President Trump was still putting the final touches on his State of the Union speech, he received the one gift he really wanted: spectacular jobs growth figures. Some 304,000 jobs were created in January, marking 100 straight months of job growth.
The jobs growth came despite the controversial partial government shutdown.
It represents the longest such period of jobs growth on record in the US.
And it is something Mr Trump can crow about.
The year started off strong, with the blockbuster January jobs gain pointing to expansion of more than three per cent in the first quarter, top White House economist Kevin Hassett says.
‘FIST BUMP’ FIGURES
While Mr Hassett acknowledged that his office had underestimated the impact on the economy of idling 800,000 federal workers, he was upbeat about the outlook.
He said he got a “fist bump” from President Donald Trump after the January employment report was released, providing the “good news the White House needed.”
“My thought is the negative effects we talked about from the shutdown will be very, very hard to see in the data,” he told CNBC.
“I think Q1 has got to be well north of two and maybe even north of three per cent” growth, given the momentum from employment.
The White House believes the stimulus provided by 2017’s massive corporate tax cuts is producing “a tax-induced supply shock” that will boost growth without increasing prices.
“So I think we could go forward with a great deal of confidence that the high growth isn’t pushing an enormous amount on inflation,” Mr Hassett said.
STEADY AS SHE GOES
Financial markets have become increasingly concerned that despite strong jobs growth the economy will slow this year.
And those fears prompted the Federal Reserve to signal clearly that it intends to pause its interest rate increases.
The Institute for Supply Management, an association of purchasing managers, reported overnight that its service index fell to 56.7 per cent last month, down from 58 per cent in December.
The January reading was the lowest since July 2018. But any reading above 50 signals growth. So even with the January decline, the index shows that service industries, where most Americans work, has been expanding for 108 consecutive months.
The ISM notes that executives of service companies remain optimistic about overall business conditions.
The US trade war with China also has created uncertainty and threatened to slow both economies.
Mr Hassett said he remained “hopeful” Washington and Beijing could reach an agreement but cautioned that “there’s still a lot of work to do.”
The US will more than double the punitive tariffs on $200 billion in Chinese goods if no deal is agreed by March 1. The sides held a second round of talks in Washington last week and are expected to meet again in Beijing later this month
“It’s a wait-and-see confidence situation,” said Anthony Nieves, the chair of ISM’s non-manufacturing business survey committee.
SECOND SHUTDOWN THREAT
At loggerheads with Democratic leaders and under pressure from conservative backers, President Donald Trump refused to sign government funding bill that did not include money for his long-sought wall on the US-Mexico border.
He has insisted on $5.7 billion in funding.
As the shutdown dragged on with hundreds of thousands of Americans missing paychecks, Trump ultimatelyagreed to reopen the government for three weeks to allow negotiations on border security to continue.
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With the new February 15 funding deadline looming, Mr Trump has hinted at the possibility of declaring a national emergency to secure wall funding if Congress doesn’t act.
That has amplified concern over a possible second shutdown.
“If there’s another shutdown, that willdefinitely affect the psyche” of companies’ purchasing, Nieves said in a telephone interview with AFP.
Some economists view the decline in services activity as signalling that the economy will slow this year after a strong performance in 2018. An ISM report last week showed that US factories grew at a slightly faster pace in January than in December — when manufacturing marked the slowest pace in more than two years amid concern over the impact of Mr Trump’s trade policies.