Celebrating Labor Day in the U.S. hasn’t been easy in the wake of the Great Recession, but American workers have 17 million good reasons to pop the champagne bottle this year.
Just a few days before the holiday, the government said the U.S. added 156,000 new jobs in August, bringing the total number of people who’ve found jobs in the past seven years to a whopping 17 million. The unemployment rate stood at 4.4%, just a touch above a 16-year low.
Better days might even lie ahead.
The rest of the globe is finally starting to catch up to the U.S. economy, laying the seeds for faster growth. It’s been a long time since the world’s largest economies were working in sync.
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American manufacturers in particular have benefited, a good sign for the broader economy.
“This sudden strength in manufacturing partly reflects a better tone in exports, further reinforcing the point that the global economy has quietly taken a turn for the better,” said Douglas Porter, chief economist at BMO Capital Markets.
Don’t expect the U.S. trade deficit to fall dramatically, though. The U.S. has outperformed most of its rivals since the end of a global downturn in 2009, allowing better-off Americans to buy more imports.
As a result, the trade deficit remains quite high. Economists predict the trade gap will total about $44.8 billion in July — about $3 billion higher compared to the same month in 2016.
Although President Trump views the deficit as a source of weakness, the trade gap is actually a reflection of the strength of the U.S. economy compared to other nations. Like his predecessors Trump will find it hard to slash the deficit unless he finds a way to curb the appetite of Americans for foreign-made goods.
The trade deficit is not the only seeming blemish for an economy still growing more than eight years after the 2007-2009 recession.
An elevated number of Americans who want full-time jobs still can’t find one, for one thing. A broader measure of joblessness puts unemployment rate at 8.6% in August, above the 7.9% rate that prevailed a year before the recession.
Wages are also rising more slowly than usual — just 2.5% in the past 12 months. Hourly pay typically increases 3% to 4% a year when an economy is humming.
Absent faster pay there’s not much more consumers can do to boost growth.
“So far wage growth has been one of the most disappointing aspects of the job market and the economic recovery,” said Mark Simenstad, chief investment strategist at Thrivent Asset Management.
Slow wage growth is not a big surprise, however, given the low rate of productivity. And low productivity is understandable in light of the reluctance of companies to invest. Despite a recent pickup, business investment has been soft through the recovery.
That’s made it harder for workers to do more on the job — be more productive — and justify higher pay.
The government is likely to report a healthy 1.4% increase in productivity in the second quarter, but similarly strong gains have been few and far between during the current expansion. Nor is there any evidence that such a increase would be sustainable.
Future Labor Day holidays would be more joyful if businesses invest more in technology and other assets that helped workers do their job better. That day has been a long time in coming, but it’s still not here yet.