While faster wage growth is certainly good news for American workers, Wall Street worries that signs of real tightness in the labor market might force the Federal Reserve to tighten monetary policy more quickly. Very low interest rates have kept the financial markets buoyant, so any sign that the central bank’s easy-money policies are coming to an end could take some of the air out of stocks.
For all the debate over President Trump’s tweets claiming credit for a strong economy and the rally on Wall Street, the bottom line is that the labor market is fairly healthy — just as it was in recent years under President Barack Obama. Going into Friday’s report, payroll gains averaged 180,000 in the first half of 2017 compared with 193,000 in the second half of 2016.
As a candidate, Mr. Trump pointed to the participation rate, which is at multidecade lows, and suggested that the true unemployment rate is much higher than is reported. In July, the participation rate stood at 62.9 percent, an increase from 62.8 percent in June and level with January, when he took office.
Although some of the decline in participation is due to the retirement of the baby boom generation, the participation rate for prime age workers has also been weak.
So while hiring and the overall unemployment rate continue to be important, an even better gauge of how Mr. Trump is handling the economy in the months ahead will be if wages and labor participation both rise.
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