The Big Q: Does anyone object to that?
The Big A: No one that I know of.
Again every forecast, the actual number of jobs created in April has exceeded expectations and shows that The Trump Expansion is gaining momentum.
In April, the US economy added 263,000 jobs. The unemployment rate dropped to 3.6% which is the lowest rate in about 50 years.
This likely shows that not only is the economy growing at more than a 3% rate, but the growth rate could accelerated this year. President Trump’s economic policies continue to reverse the anti to no growth policies of The Hussein Obama Administration.
Notably, the unemployment rate fell for very demographic except teenagers. While the unemployment rate for all adults is 3.3%, the unemployment rate for teenagers is 13%. The high rate for teenagers is due to a number of states raising the minimum wage. Where the minimum wage has increased to $15/hour.
Since the value of an unskilled worker in the US is much less than $15/hour, the number of jobs available to unskilled teenagers has been reduced. And by the same token, the $15/hour wage rate is attracting more teenagers to enter the work force rather than seek additional education or skills.
The take-away: More workers seeking jobs coupled with fewer jobs available leads to higher unemployment.
It has been 11 years since the last recession began so Big Q2: Is a recession on the horizon?
The business-cycle behavior historically indicates that the US economy experiences a recession once every 7 to 10 years. Recall, there was a recession in Ys 1981, 1991, 2001 and the Great Recession began in Y 2008.
And with that a recession usually a lasts a year. Then the economy moves to the recovery stage which typically lasts about 2 years. Then the economy enters the expansion phase when annual economic growth is the highest. The expansion lasts 4 to 6 years. During this business cycle the length and pace of the recovery stage will be longer, much longer.
This recovery started in mid-2009. The administration should have set economic growth as the Top policy priority. But The Hussein Obama Administration concentrated on what it saw as social injustices.
The economy never went beyond the recovery stage. And the annual economic growth averaged 1.9% until Y 2017.
The Key reversal
When Donald Trump became President he set economic growth as his Top policy priority, eliminating 100’s of anti-growth regulations imposed by then President, Mr. Hussein Obama. Then President Trump convinced the Congress to reduce taxes for all Americans, and then in Y 2018, the economy entered the expansion phase.
Now, since the expansion started last year and since expansions usually last for 4 to 5 years, we are years away from a recession.
Some prominent economists have said and are opining in public, that the increase in economic growth from The Trump Tax cut is temporary and will be short-lived. Let the record show that assessment is wrong. The tax cut was not a 1 time cut, rather a long-term cut designed to increased demand in the economy, while also providing new capital so business can increase supply.
The lower tax rates for all earners and all corporations increased growth in Y 2018 to nearly 3% and would likely have exceeded 3% if the Fed had not raised interest rates 4X in Y 2018.
In Q-1 of Y 2019 the US economy grew at a 3.2% rate. As the effects of the tax cut flowed through the economy we and others see the annual economic growth pace increase beyond 3%.
Inflation, none in sight
Inflation is running at less than a 2% annual rate. And, there is little concern that inflation will increase, even with wage increases exceeding 3%. That is because productivity was measured at 3.6% in Q-1. As the tax cut created new capital, business investment increases is driving productivity higher.
The means, that as long as productivity equals or exceeds wage increases there is no upward pressure on labor cost and no increase in inflation in the Fed’s inflation measure, the PCE.
The economy is growing, wages are up, inflation low, new opportunities are being created for all Americans, underemployed workers are finding better jobs and once discouraged workers are returning to the labor market.
I have been in meeting all day Friday, and without exception the businessmen I met with are keen to expand into this economic cycle, now who could object to that?
Have a terrific weekend
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