So we will not add to the world's Brexit woes by having a recession here in America. At least not soon. The U.S. economy added 287,000 jobs in June, compared with a meager 11,000 in May (revised down yesterday from 38,000). Since we are deep into the political season, cheers from the Obama-Clinton campaign, and insistence by Republicans that when the up-and-down monthly numbers are smoothed, the economy is producing about 150,000 jobs per month, well below the average monthly job gains of 251,000 in 2014 and 229,000 last year.
But that should not be a reason to worry. The Federal Reserve Bank of Atlanta estimates that if we add 118,000 jobs per month over the next year the unemployment rate will remain comfortably below 5%. Jan Hatzius, chief economist at Goldman Sachs is more optimistic: He says that 85,000 new jobs per month will keep the unemployment rate stable and the economy at or close to full employment. David Kelly, chief global strategist of JP Morgan Asset Management, contends that there is no slack left in the jobs market, limiting the attainable growth of the economy to something below an annual rate of 2%.
It should come as no surprise that the average job growth in recent months is below the rate of the past two years. Job gains typically slow after a long period of economic expansion such as the current one, during which the double-digit unemployment rate has been more than cut in half.
Federal Reserve Board chairwoman Janet Yellen and her monetary policy colleagues suspended their plans to raise interest rates when last month's job-growth figure was originally announced at 38,000 (since revised to an even punier 11,000), and the threat of Brexit loomed. They were right to guess that the May jobs figure was an aberration, and to worry that Brexit might shock money and securities markets. They were also right to guess that the uncertainty in advance of and later accompanying Britain's decision would lead to a flight to the safety of the dollar, driving it up relative to other currencies, making our exports dearer and imports cheaper. The U.S. trade deficit jumped 10 percent in May, and the negative effect of Brexit on world growth, temporary though it might prove to be, is likely to be no friend to our exporters in the near- and medium-term future.
When the Fed has its policy meeting later this month—July 26 and 27—it will have another chance to consider just what the jobs data and Brexit mean for its plans to end the era of near-zero interest rates. It will also have an opportunity to determine whether the fact that the stock market recovered all of its post-Brexit losses means that we have come through the crisis created by Britain's decision. And even if Brexit turmoil is behind us, the Fed will have to consider whether the low rate of business investment and profits, what television commentator and Donald Trump adviser Larry Kudlow calls a "business recession", means that the economy is still too fragile to tolerate an increase in interest rates.
As usual, Yellen & Co. will have to give weight to data pointing in the opposite direction. Yellen has always paid special attention to the labor market. Average hourly wages have risen at an annual rate of 2.6 percent in the past year. In hot home construction markets such as Phoenix average hourly construction wages have jumped 8.6 percent after adjusting for inflation. That wage-rising tightness has now extended to the market for unskilled workers. Some employers are responding by raising wages, others by taking on workers in need of more training to perform the tasks at warehouses and call centers George Corona, an executive at Kelly Services, the $5.5 billion temp agency, told Bloomberg Businessweek.
My guess is that the Fed will hold rates at current levels for the rest of this year and perhaps well into 2017. That means:
* Mortgage rates will remain close to their current all-time low, keeping home-buying strong. Sales of existing homes are at their highest levels since February 2007.
* Car-buying, which last month rose but at the lowest pace in over a year, won't collapse. Buyers are heavily dependent on generous financing terms to keep monthly payments affordable, especially as average prices of sensor and gadget-laden cars and light trucks continue to rise.
* Many home-owners will trade in their existing higher-rate mortgages for new, cheaper ones. Those re-financings will generate substantial revenues, especially for Wells Fargo, as well as for our beleaguered, revenue-hungry but financially solid banks.
JP Morgan's David Kelly is probably right that our economy is "a healthy tortoise, not a sickly hare." Jobs are relatively plentiful, wages are rising, share prices have shaken off the Brexit fears, home and car sales are increasing, and our banks have passed the latest stress tests. Not bad.
Yet the level of dissatisfaction with the economy's performance is so high that we have a billionaire from New York City and an old-time socialist senator leading a right-left revolution of those who feel that a rigged system has doomed them to ever-lower real incomes. No surprise if we consider, not one or two months of jobs and other data, but where the country has gone since the turn of the century.
As Jon Hisenrath and Bob Davis point out in a Wall Street Journal study of "the American Economy's Failed Promises," we have had two recessions, a technology-bubble collapse, a housing boom and bust accompanied by massive foreclosures, the largest financial crisis in 75 years and, now, a prolonged period of weak growth. To which add a perception that any gains during this recovery have been concentrated in the portfolios of the already-rich and, now, confusion and uncertainty resulting from Britain's decision to exit the European Union. Throw in the feeling that America has become a spent force in world affairs, with China on the rise in Asia, Russia moving to reclaim the world position it lost when the Soviet Union dissolved and replacing us as a player in the Middle East, Islamic terrorists hitting targets from California to Florida, and white cop-black tensions running high.
Little wonder that so many of us feel this is the summer of our discontent.