US Non-Farm Payroll Disappoints: Whose Fault Is It?

• Today, the Bureau of Labor Statistics released the US non-farm payroll data for August. The US economy added fewer-than-expected jobs last month. July’s non-farm payroll data was also revised downward.
• US President Donald Trump frequently criticizes the Federal Reserve for slowing down the US economy. However, some surveys have shown that it’s Trump’s trade war that’s hurting the US economy.

Today, the Bureau of Labor Statistics released its August non-farm payroll data. Payroll data is among the most closely watched economic indicators. US economic growth has been better than expected this year amid a strong consumer sector. A strong jobs market helps buoy the consumer sentiment.

According to the Bureau of Labor Statistics, US non-farm payrolls increased by 130,000 last month. The employment data was lower than what analysts were expecting. July’s non-farm data was also revised downward. According to the Bureau of Labor Statistics, employment in the federal government increased last month. While there were notable job increases in the financial and healthcare sectors, the mining sector lost jobs. The metals and mining sector is among the sectors that have been the worst affected by Trump’s trade war. Last month, U.S. Steel Corporation (X) also announced job cuts.

Non-farm payroll is trending lower this year compared to 2018. According to the Bureau of Labor Statistics, non-farm payrolls have averaged 158,000 per month so far in 2019 compared to 223,000 per month in 2018. Though the US economy is still creating a decent number of jobs every month, growth has slowed. US economic growth has also slowed down this year.

President Trump frequently blames the Federal Reserve for slowing the US economy. Just today, he lashed out at Fed Chair Jerome Powell on Twitter. He tweeted, “I agree with @jimcramer, the Fed should lower rates. They were WAY too early to raise, and Way too late to cut – and big dose quantitative tightening didn’t exactly help either. Where did I find this guy Jerome? Oh well, you can’t win them all!”

Meanwhile, US August ISM manufacturing activity fell below 50. Both the ISM and IHS/Markit surveys showed that Trump’s trade war is taking a toll on US businesses and employment. The consumer confidence survey has also said that the trade war could negatively impact the US consumer sentiment. Meanwhile, lower-than-expected August non-farm payroll data raises hopes of a Fed rate cut.

Several US companies have asked Trump to reconsider the tariffs on China. Apple (AAPL) CEO Tim Cook has told Trump how the tariffs will affect it compared to its competitors. Earlier this year, Apple also said China’s slowdown was hurting its earnings. There were reports that Apple might diversify its supply lines away from China. Other US companies Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOG) are also thinking along similar lines.

Meanwhile, US stock markets have looked strong this year, and the S&P 500 (SPY) is approaching its all-time high. A US-China trade deal could help propel US stocks higher.