Business and consumer sentiment is deteriorating. Recession odds have ballooned. Wall Street has not fully recovered from the multi-trillion-dollar losses in the first quarter. But while Cassandra-esque economists raise alarm over President Donald Trump’s tariffs, the US economy is holding steady, with private investment popping and Americans obtaining more jobs than their foreign counterparts. Is this the beginning of the so-called new golden age, or just a blip on the radar?
April Jobs Report Beats Estimates
The US labor market finished a busy week of economic data. The numbers did not disappoint.
In April, the US economy added 177,000 new jobs, higher than the consensus forecast of 130,000. Although this was down from the previous month's downwardly adjusted 185,000, the April reading was above the three-month average of 155,000. The unemployment rate was flat at 4.2%; the labor force participation rate ticked up to 62.6%, and average weekly hours clocked in at a higher-than-expected 34.3.
Health care led the employment gains with 51,000 new positions. This was followed by transportation and warehousing (29,000), financial activities (14,000), and social assistance (8,000). Conversely, federal government payrolls fell by 9,000, and manufacturing shed 1,000 jobs.
Revisions continued in last month's Bureau of Labor Statistics report, totaling 58,000 in February and March. However, welcoming trends offset these adjustments, especially compared to what occurred in recent years.
First, over the last several years, the previous administration's open-border policies have caused a chasm between US-born and foreign-born workers. In April, the number of employed American workers increased by approximately 1.04 million. By comparison, the number of foreign-born workers declined by 410,000.
Second, the number of people working two or more jobs has surged amid the post-pandemic inflation bomb. This trend took a break last month, sliding by 76,000. Additionally, self-employed workers increased by nearly 200,000 to 9.948 million.
Third, the household portion of the April jobs report, which removes duplication, soared by 436,000. As Liberty Nation News has reported over the past couple of years, this metric has been typically negative, so it is compelling that it topped the establishment alternative.
In the end, there were some concerning numbers, such as average hourly earnings falling short of expectations and overall government payrolls increasing by 10,000, but the latest employment snapshot should soothe labor market fears for now.
Underneath the GDP Hood
Wait a minute. The US economy contracted 0.3% in the first quarter, meaning one more quarter of negative GDP growth, and the country is in a technical recession. Of course, President Donald Trump took a page from his predecessor’s playbook and redefined the term. However, a deeper dive into the Bureau of Economic Analysis’ GDP report suggests it is not time to panic.
The headline figure is indeed worrisome, but context matters. A 41% spike in imports – calculations deduct imports from the GDP since they represent purchasing goods and services not made in the United States – and a modest drop in government spending led to the 0.3% decline. At the same time, private investment soared by an all-time high of 21%; real consumer spending remained positive, and net exports rose more than 1%.
This is exactly what conservatives would want to see. Private investment takes into account business spending on equipment, inventory builds, and construction. This often reflects optimism surrounding lower energy costs, deregulation, and tax cuts. A negative government GDP contribution is icing on the cake.
John Tamny of RealClear Markets said it best:
"Keep the above truth well in mind with government spending top of mind. Governments that produce nothing attain their spending power from taxable access to the wealth of those who do, yet the useless number that is GDP is actually enhanced by government spending. In other words, the most cited number in 'macroeconomics' increases the more that governments spend wealth extracted from the productive. If we ignore that the central planning of resources produced in the private sector is by its very description a wet blanket laid on economic growth, we can’t ignore that counting government spending as economic growth is double counting; as in the growth already occurred, hence the government spending."
Of course, this could all change in the coming quarters if business and consumer sentiment surveys translate into a deterioration of the hard economic data. The White House could be upbeat about the second quarter’s prospects as the Atlanta Federal Reserve’s GDPNow Model estimate signals an expansion of more than 2%.
Stock Market Rebounds
Year-to-date, the leading stock market benchmark averages are down in the doldrums. The good news is that they have left either correction territory or the bear market. Here is a breakdown of how Wall Street has performed in the past month (April 2 to May 2):
Dow Jones Industrial Average: +7%
Nasdaq Composite Index: +14%
S&P 500: +11%
This is a double-edged sword, however, because if janitors have mopped up all the blood on the streets, there is less demand for US Treasury securities. After the solid April jobs report, the benchmark ten-year yield picked up some gains and firmed above 4.27%.
The mainstream is hoping for Trumponomics to crash and burn – and economic observers are betting on a downturn – but early second-term data suggest the United States is staying afloat.
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