The Hiring Rate of the United States Stagnates
China-America Trade War Continues to Disrupt American Economy
The Great American Jobs Machine is showing signs of cracking, revealing its increasingly visible weaknesses from both the age and damage from a threatening trade war with China, as well as a slowing global economy.
July 1st, 2019 marked the 107th consecutive month of employment rising in the United States, marking the record for the longest period of economic growth in US History. With all time high stock market prices, and an addition of 224 000 new jobs solely in the month of June — nearly double the estimate of the 140 000 that economists had expected — the US economy had seemed as if it would reach the lowest unemployment rate since December 1969, at 3.7% Nationally. The sudden increase in the labour market had defied the panicked narrative on Wall Street that an economic downturn followed by a stock market crash was right around the corner.
Unfortunately, last month’s damaging economic developments — which resulted in the newfound warnings of a potential impending recession — now threaten the current state of the economy, with a steep decrease in the number of new jobs created.
The latest evidence of a slowing in the labour market came this Friday, when the US Department of Labour stated that the economy had added a total of 130 000 jobs in August, significantly lower than what economists had predicted for the month, and a 42% drop in total jobs added since June. Most alarmingly, the report would have shown a considerably lower number of jobs added to the economy were it not for the government addition of 25 000 temporary census workers.
Much of the slow growth of jobs in the US economy can be attributed to the escalating trade war between the United States and China, which has injected hiring uncertainty and business risk in sectors that were affected by the effects of tariffs, most notably manufacturing, an industry that employs 8.5% of the American workforce, with a high concentration of jobs in the South and the industrial Midwest.
“It may in part be due to the difficulty in finding workers with the right skill sets given unemployment remains just 3.7%,” said James Knightley, Chief International Economist at ING. “However, given creeping caution about the international backdrop and uncertainty on trade, firms may be increasingly cautious about hiring too.”
One of the sectors most harmed by the tariffs caused by the China-America Trade war, the manufacturing sector, had seen an increase of only 3 000 jobs in August; half of this year’s average growth of 6 000 and less than a quarter of July’s figures. The 2018 figure representing average job growth in manufacturing was at 22 000 jobs per month.
“We’ve lost steam — there’s no question we are slowing,” stated Diane Swonk, Chief Economist at Grant Thornton. “We are losing momentum.”
Swonk continued to speak on the matter of current economic trends, stating that much of the current problems relating to the slowdown in the economy can be attributed to global instability of trade, most prominently citing the current China-America trade war. Swonk continued, stating that while she is not currently fearing an economic recession, there is no doubt that the stagnation of the labour market will continue.
President Trump’s advisors continue to explain that there is currently little risk created by the trade war to the US labour market, in an attempt to reassure people that the current economic warnings of a recession are just that — warnings. In the end, the administration continues to confidently tell Americans that the increase in jobs added to the economy will stabilize, and promises that the President’s trade policies are aimed towards the economic prosperity of working Americans.
Written by Alex Joo, Writer for the Junior Economist
Originally published on September 14th, 2019
