An impressive jobs report shows the US economy heading into an election year

„Wow.” „Good!” „Holy Molly.” These were the initial reactions of some online commentators to the US Labor Department's announcement on Friday that employers added 353,000 jobs in January, more than Wall Street had expected. Government statisticians reviewed the December jobs numbers, which were originally reported at two hundred and sixteen thousand and totaled three hundred and thirty-three thousand. That's a positive development as well, but the January number was the real shout, because it indicates that the economy's momentum shown at the end of 2023 has carried over into this election year.

President Joe Biden may have been exaggerating a bit when he told a group of auto workers in Michigan last Thursday that the United States has „the strongest economy in the entire world.” But he has good reason to be excited. In the past week alone, there have been half a dozen encouraging economic reports, covering everything from GDP growth rates to inflation rates and consumer confidence levels. The employment report was number one. It shows strong hiring in retail, health care, professional and business services, social assistance and the government sector. As more people returned to the labor force — another good sign — the unemployment rate was 3.7 percent. It has been below four percent for almost two years, something that hasn't happened since the late nineteen sixties.

As always, it's important not to generate too much data per month. And there were a couple of caveats buried in the January report. The average length of the work week has decreased slightly, and statistical issues related to seasonal adjustment may have inflated the number of headline jobs. But the payrolls survey is still the gold standard of economic indicators, and shows that over the past three months, the economy has created more than three-quarters of a million jobs. Nearly four years into the post-pandemic economic recovery, that's an impressive performance.

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In fact, the U.S. economy is so strong that Donald Trump, after spending three years saying Biden was driving the economy into a ditch, has changed tack and is now trying to take credit for some recent improvements. „This is the Trump Stock Market,” Trump wrote on his social media site earlier this week. He insisted that investors expect him to win in November, which is why stock indices have hit new highs. Nice try, but no cigar. Stronger-than-expected economic growth and faster-than-expected inflation are the main reasons the stock market is rising and employers are hiring. That double dose of good news has renewed investor enthusiasm.

At this time last year, many economists were predicting a recession as the Federal Reserve kept interest rates high to curb inflation. But the economy really picked up in 2023, with GDP growing at an annual rate of 2.5 percent, up from 1.9 percent the previous year. The inflation rate has declined to 3.4 percent in December 2023 from 6.5 percent in December 2022, and these figures may understate the underlying decline. Over the past six months, if you look at the central bank's preferred inflation – which excludes volatile energy and food prices – has been 1.9 per cent on an annualized basis. This is below the central bank's target rate of two percent. At a press conference on Wednesday, Fed Chairman Jay Powell pushed back against the notion that he and his colleagues would deliver the first cut in interest rates at next month's policy meeting, but he left intact expectations of an occasional major policy change. „It's a good story. We've had six months of good inflation,” he said this spring.

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Of course, a lower rate of inflation does not necessarily translate into lower prices. The cost of some key items in household budgets — including rent, food and motor vehicles — is still higher than it was before the pandemic. Many households are still struggling to explain why Biden's approval rating for handling the economy is 37.9 percent in the RealClearPolitics polling average. No matter how low the inflation rate gets, Trump and Republicans will focus on „Biden-flation” until November.

It's to be expected. But negative stories about consumer prices do not dominate economic stories in the media. Researchers at the San Francisco Federal Reserve maintain a daily News Sentiment Index, which is based on an algorithmic analysis of countless newspaper articles from around the country. Over the past two years, the index has been below zero, indicating that most economic news is negative. Since November, the index has been above zero and on an uptrend line. In other words, media coverage now reflects positive news in official statistics, and this week provided new evidence that Americans are starting to feel better about the economy.

On Tuesday, the Conference Board, a business-finance research organization, reported that its index of consumer confidence reached a two-year high. This data point isn't exactly unexpected: Two weeks ago, another study of consumer sentiment from the University of Michigan showed a similar jump. But there was always a chance that the Conference Board reading would contradict the previous reading, which did not happen. The two survey results, taken together, clearly show that Americans' views of the economy are bright.

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What effect will all this have on the election? At a time of hyper-polarization, international unrest, and negative public comments from leaders of both parties, no one can be sure of an honest answer. Some analysts think that economic factors do not influence voting patterns; Others disagree. Be that as it may, any president wants to enter a re-election campaign with a strong economy, healthy job growth and improving consumer sentiment. That's where we are now. ♦

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