Stocks contribute to long-term financial health but can’t protect against heart attacks, so let’s not obsess over the impact of each market gyration on our 401(k) retirement accounts.
Agreed?
A more productive focus is to look at the rate of job growth throughout the economy and consider what might happen if politics get in the way.
Through 2018, business owners and consumers delivered bursts of momentum to the economy by investing and spending. The nation experienced economic growth above 3 percent and lots of hiring. In December, the government reported Friday, employers added 312,000 jobs, far more than analysts expected. An average of 220,000 jobs were added each month last year, the best performance since 2015, but an especially sound number given the already tight labor market.
The overall unemployment rate is below 4 percent, at a record low for Hispanics and near a record low for African-Americans.
“If we’re not right at full employment, we’re very close to that,” said Atlanta Federal Reserve President Raphael Bostic on Friday, The Wall Street Journal reported.
Some wags are waiting for the economy to slow down, as if recession is inevitably around the corner.
Maybe so, maybe not.
So much of economic growth, especially hiring and business investment, is a reflection of positive expectations and momentum. Employers who expect the good times to continue will hire workers. The more jobs available, the greater the competition for skilled workers, which inevitably leads to wage increases and more spending.
That virtuous cycle is playing out right now: Average hourly earnings are up 3.2 percent from the past year, the highest increase since 2008.
But President Donald Trump is an undisciplined leader, whose unforced errors are creating headaches for businesses and Wall Street.
Trump’s goading efforts to start a trade war with China have become a drag on the U.S. economy. Agriculture exports from Illinois and other farm states have been hit hard. Apple also is reporting a China-related sales slowdown because of a weakened economy there but also because of trade tension.
In Washington, Trump picked a pointless fight over the future path of interest rates with Fed chief Jerome Powell. If Trump could stay focused on the big picture (job growth) and stop rattling cages, the markets probably would keep better balance and the recession wags would have less to fear.
Inevitably, politics will intersect with the economy as the Democratic-controlled House sets its priorities and the 2020 presidential primaries approach.
Hopefully, Republicans and Democrats, from the president to newly seated members of Congress, recognize what’s at stake: the future prosperity of millions of working Americans.
— Chicago Tribune