U.S. unemployment fell to its lowest rate in 18 years and is on the brink of matching the lowest numbers in 50 years, and a former Labor Department economist is confident the economy is only getting stronger.
On Friday, the Labor Department reported 223,000 new jobs were created in May, higher than the 188,000 predicted by experts. The report also shows the unemployment rate dropping to 3.8 percent, the lowest since 2000. The U-6 rate, which also factors in part-time workers seeking full-time work and discouraged job seekers dropping out of the labor force, is at 7.6 percent, the lowest rate since 2001.
“The jobs market is performing very, very well. I think that everyone can be happy with the numbers that came out today,” said Diana Furchtgott-Roth, who served as chief economist at the Department of Labor for President George W. Bush and later as the chief of staff for Bush’s Council of Economic Advisers.
Furchtgott-Roth is confident the numbers are only going to get better as the benefits of the corporate tax cuts kick in.
“As companies start to realize and implement plans based on the 21 percent corporate tax rate, we’re going to see a lot stronger economy going forward. Don’t forget, the tax cuts were only passed January 1. Businesses are still changing their plans based on those tax cuts,” she said.
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The May jobs report also showed a 0.3 percent rise in wages, edging the expectation of a 0.2 percent gain. Many economists contend that rate is still anemic considering the overall strength of the economy, but Furchtgott-Roth says a close study of the numbers explains why.
“If you look at the jobs report carefully, you can see that the unemployment rate went down the most among people without a high school diploma and people with a high school diploma and no college. Those are the lowest-skilled people in the workforce and they come in at a lower wage.
“One needs to realize this is an average wage and when the economy is employing more low-skilled workers, as we want it to do, then the average wage will not rise as quickly as if all the gains were among the group who had a BA,” said Furchtgott-Roth.
She also says the wage number does not factor in the many benefits all workers are receiving, such as health benefits and time off for vacation and maternity leave.
That said, Furchtgott-Roth is confident wages will soon rise more substantially.
“I think the tightness of the labor market, the 3.8 percent unemployment rate, does augur very, very well for future wage increases within one’s particular group,” she said.
The labor participation rates dipped slightly once again, remaining at a stubbornly low 62.7 percent. Furchtgott-Roth suspects some of that may be due to women waiting until school starts in the fall before returning to work, but she says the rate is simply too low.
“That is definitely something we want to address, especially among workers in the prime age group of 25-55 (years old),” she said.
While Democrats found little to criticize other than President Trump tipping his hand on the jobs report before the numbers were released, experts on both sides of the aisle fear new tariffs against China and allies in Europe could stunt economic growth.
Furchtgott-Roth is not worried and believes such moves are necessary to protect vital economic interests.
“One has to realize this is a negotiating tool and also that China is stealing America’s intellectual property, so something has to be done. President after president has ignored the theft of America’s intellectual property, and it needs to be addressed,” she said.