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Policy
The short answer is not a whole lot and what it does show indicates some inconsistency with previous assumptions regarding jobs, wages, and the economy.  The number of newly created jobs, in general, is lower than in 2018.  Growth in retail workers has declined sharply when compared to the past eight months.  Unemployment is at 3.5%, the lowest in nearly five decades.  There are more workers, ages 25-54 working than in the previous twelve years. At the same time, manufacturing jobs are sharply down, with growth of only about 10% compared to the growth rate in 2018.  Wages are largely stagnant and lower this year than in the previous six months. This is surprising since with nearly full employment wages are usually driven higher to attract workers.  Inflation is not rising though it is expected to do so in current conditions.  The gap between increased employment and stagnant wages is unusual.  The Fed has dropped the interest rate to 1.75-2.0 (for overnight bank to bank loans) for the second time in a year after increasing it steadily in the post-recession years from 2015-2019.  The Fed interest rate averaged rate .25 during the recession. This ostensibly is to give business investment a boost and bolster economic growth.

Analysis
These mixed features suggest the economy is cooling and potentially headed for a slowdown.  If the pool of laborers persists in its decrease, wages should increase but with the current unemployment being low it has so far failed to do so.  The slower rate in job growth seems compatible with low unemployment but the wage stagnation is cause for questioning the relationship between jobs and wages and to inflation which is expected to increase under current conditions but has not.  Analysts suggest there is a slow downturn in economic growth and debate whether this indicates a coming recession or not, since the news is mixed.  Trump claims the low unemployment as a win for his economic policies but the Democrats point to the decreases in manufacturing, perhaps tariff related, and the flat wage growth as indicating otherwise.  The lowering of the Fed’s interest rate is aimed at sustaining full employment, controlling inflation at 2%, and constraining long-term interest increases.  All of these impact consumer debt, interest rates, mortgage and credit card loan rates, and consumption.   Some analysts suggest that the recent steep decline in retail workers is only partially due to bankruptcies and other wise may indicate an expectation of less consumption on the horizon.  Perhaps the “real” truth is we are in unchartered territory and even the analysts are only guessing as to the consequences of the mixed factors in the report.

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References:

Photo by unsplash-logoAaron Burden

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