Tom Crouser: Jobs are up, but manufacturing's down (Opinion)

The U.S. added 136,000 jobs in September and unemployment dropped to a low which hasn’t been seen since Joe Namath led the New York Jets to victory in 1969’s Superbowl III. That’s good, right? It’s more complex than that.

The Bureau of Labor Statistics reported the additional jobs, but the rate of growth fell to an average of 161,000 this year compared to 223,000 last year. Many fear this weakening trend will continue as the economy, like the stock market, is based more on what people think will happen than what is happening.

The good news is that health care as well as professional and business service employment grew. The bad news was the loss of 2,000 manufacturing jobs that the tariffs were designed to bring back stateside.

Although retail jobs changed little in September, retail has lost 197,000 jobs since its peak in January 2017. We only need to view retail store closings around us to validate that. September’s increase in jobs was also bolstered by temporary hiring for the census.

Importantly, the closely watched survey of the country’s manufacturing firms, the Institute for Supply Management’s Purchasing Managers’ Index, hit a low in August not seen since June 2009, during the Great Recession. More importantly, this was the second month in a row that the index hit such a new low.

Is this index a big worry? Peter Boockvar, chief investment officer at Bleakley Advisory Group said to CNBC, “We have now tariffed our way into a manufacturing recession in the U.S. and globally.” In the same piece, Torsten Slok, chief economist at Deutsche Bank, said of the purchasing index, “There is no end in sight to this slowdown, the recession risk is real.”

For his part, President Donald Trump responded to the report by lashing out at Federal Reserve Chair Jerome Powell. He tweeted, “As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!”

In July, the Fed did cut interest rates although some questioned why. Supporters said it was to prolong the economic expansion, the longest in U.S. history. Others said the move benefited the stock market more than the real economy.

Typical beneficiaries of rate cuts are mortgages, business loans, auto loans and credit cards. This usually leads to more business activity. However, loans were already inexpensive, suggesting the Fed was responding to factors outside its control, such as the global economic slowdown, labor shortage, trade wars and a lack of housing supply.

Heather Long, Economics Correspondent for The Washington Post wrote, “The last time the Fed cut rates was in December 2008, when unemployment was over 7 percent (and rising quickly), the stock market had lost a third of its value and a major financial institution, Lehman Brothers, had just declared bankruptcy, rocking the financial system. Today unemployment is at a half-century low (3.7 percent), the economy is growing at a healthy pace (over 2 percent) and the stock market is sitting at record highs.”

She also wrote the top three reasons for the Fed rate cut were offsetting the administration’s trade war; the need to act at the first signs of trouble rather than wait; and to bolster inflation, which is sitting at 1.6 percent instead of the desired 2 percent.

As for me, I’m more simplistic. If the economy is doing so well, how come we, as the U.S. government, had to borrow another trillion dollars in 2019 to make ends meet? And if the tax cut is working, how come this is the second year in a row that we have had to do so?

Yes, the economy is good. But that may be the bad news.

Tom Crouser is a business consultant living in Mink Shoals and a Gazette-Mail contributing columnist. Reach him at tom@crouser.com or follow @TomCrouser on Twitter.

Funerals for Wednesday, October 23, 2019

Ball, Sherman - 2 p.m., Spencer Chapel United Methodist Church.

Clay, Karen - Noon, Koontz Funeral Home, Hamlin.

Clonch, Daniel - 1 p.m., O'Dell Funeral Home, Montgomery.

Harvey, Joseph - 11 a.m., Donel C. Kinnard State Veterans Cemetery, Dunbar.

McClung, L. Bruce - Noon, Aldersgate United Methodist Church, Charleston.

Mills, Ambra - 1 p.m., Leonard Johnson Funeral Home, Marmet.

Pitsenbarger, Cindy - 7 p.m., Solid Rock Worship Center, Oak Hill.

Sowards, Teresa - 1 p.m., Keller Funeral Home, Dunbar.

Stilwell, Jason - 3 p.m., Strange Creek Cemetery, Strange Creek.

Vacheresse, Robert - 12:30 p.m., procession to leave Barlow Bonsall Funeral Home, Charleston.

Vaughan, Darlene - 10 a.m., Cross Lanes Baptist Church, Cross Lanes.