Trade War Unlikely to Temper Robust Jobs Growth in July

For the July jobs report due to be released on Friday August 3, our model forecasts a gain of 239K.

And, for the August report, due out on September 7, it forecasts a gain of 240K jobs. 

The model’s most important factor, credit spreads, have not widened at all in response to the U.S. tariffs on goods from China and other countries.  So long as credit remains readily available, employers might go ahead and hire despite the uncertainty of the tariffs dispute.  Another reason not to be overly concerned about the trade war (in so far as our model’s accuracy is concerned), is that the hardest hit industry might be the farm sector.  It might sound obvious, but nonfarm payrolls, by definition, don’t account for any impact on the farm sector directly.  That said, if the farm sector suffers from tariffs, it could eventually hurt employment in other sectors as farmers and their workers curtail their consumption.  However, if that were to occur, the impact would not be felt for many months into the future. 

The other factors mostly cancel out.  Rising oil prices will likely hurt employment growth slightly but the yield curve, which is substantially lagged in our model, will likely continue to support employment growth owing to its steepness over the past few years.  Tighter monetary conditions may hurt employment growth in 2019 and especially 2020 and 2021 but are of little short-term concern.

Our analysis of the previous jobs report can be found here.