Latest Jobs Report: The Last Hurrah for the US Economy?Adam Gardiner
The latest jobs report was heralded by mainstream media as another indication that the US economy is humming along just fine. The consensus estimate of 190,000-200,000 jobs added was blown away by the actual 250,000 jobs reported. The unemployment rate is now at 3.7%, and wages increased year-on-year at over 3% for the first time since 2009. But looking behind those headline numbers, is the economy really on sound footing?
Tackling the wage issue first, we see that the reason for the large increase is that October 2017’s wage figures were unusually low due to the effects of severe hurricanes a year ago. Had those wage numbers been more normal, the year-on-year increase wouldn’t have been nearly as pronounced. So the latest numbers aren’t a sign that wages are increasing really at all, just that they’re rebounding from an unusual dip. That’s yet another indicator that the wageless recovery that has been ongoing from the financial crisis remains in effect. As long as wage increases only increase along with inflation or lag inflation, American households aren’t doing any better financially than they had been before.
With regard to the jobs numbers, we have to remember some of the external effects that may have influenced those numbers. There may have been a temporary boost in some areas due to hurricane reconstruction, and of course there’s always the fact that numbers end up being revised even months after they’re first reported. Then too there’s the possibility that job numbers may be manipulated by the same factor that’s pushing GDP: the temporary effect of front-running tariffs.
Many companies facing tariffs on exports or imports rushed to ramp up production in advance of the worst parts of the tariffs going into effect. That provides a temporary boost to GDP that will evaporate once the tariffs actually are put into place. Come January when the Trump administration’s 25 percent tariffs on Chinese imports go into effect, expect both GDP and job numbers to start falling. And since China will retaliate with more tariffs on US goods, that will further harm US companies.
Coupled with existing weakness in stock markets and rising interest rates, the US economy is facing
a perfect storm of conditions that pose a threat to investors. Particularly for those nearing retirement, the weakness in markets is concerning. During the financial crisis markets lost over half their value, decimating the dreams of many a retiree. Were that to happen again today, millions of investors and retirees would see their plans for retirement shattered.
Thankfully investors can take advantage of a gold IRA to benefit from gold’s ability to protect wealth. While stocks were declining during the financial crisis, gold gained 25% in value. And with a gold IRA you can even transfer existing retirement assets tax-free, gaining the benefits of investing in gold along with the favored tax treatment of conventional IRAs. That’s a win-win for those looking to safeguard their assets ahead of the coming market storm.