Weak Jobs Report Shows the Cost of Trade Wars

COMMENTARY Jobs and Labor

Weak Jobs Report Shows the Cost of Trade Wars

Jun 7th, 2019 3 min read
COMMENTARY BY
Tim Doescher

Associate Director, Coalition Relations

Tim is the Associate Director of Coalition Relations.
Tariffs and tariff threats have created uncertainty about the economic environment. Feodora Chiosea/Getty Images

The Bureau of Labor Statistics released a lackluster jobs report on Friday, falling short of most expert predictions, and continuing to make the case that bad economic policy, like tariffs, will not serve U.S. interests in the long term.  

The report showed a gain of 76,000 jobs, falling well below the 180,000 predicted by experts. In addition, March job gains were revised down from 189,000 to 153,000 and the April numbers lowered from 224,000 to 263,000, for a total shortfall of 75,000 in previously estimated new jobs over the past two months.

Wages for all employees increased by 6 cents to $27.83. Over the course of the year, average hourly earnings have increased by 3.1%. That’s great news even though it falls slightly short of the predicted 3.2%. 

The historically low unemployment rate of 3.6% remains unchanged. In addition, the U-6 unemployment rate, which measures part-time workers who’d prefer a full-time position and people who want a job but aren’t actively looking, fell from 7.6% to 7.3%.

The number of people in the labor force edged up slightly, but not enough to change the labor force participation rate of 62.8%. 

Among the major worker groups, the unemployment rates for adult men (3.3%), adult women (3.2%), teenagers (12.7%), whites (3.3%), and Asians (2.5%) showed little or no change in May. African American unemployment fell half of a percentage point from 6.7% to 6.2%, and the record-low Hispanic unemployment rate stayed the same at 4.2%.

Here is where a majority of the new job gains and losses came from:

  • Professional and business services (+33,000 jobs)
  • Health care (+16,000 jobs)
  • Wholesale trade (+7,000 jobs)
  • Construction (+4,000 jobs)
  • Manufacturing (+3,000 jobs)
  • Retail Trade (-7,600 jobs)

Adding manufacturing jobs has been a big focus of the Trump administration, and while 2019 has been slower than 2018, manufacturing jobs are at the highest level since 2008.   

However, just last month, according to a recent study by the Institute for Supply Management, factory activity fell to the lowest level since 2016. This is bad news if we want to continue manufacturing gains.  

So the obvious question is: Why the poor performance?

Many would say this report suggests that manufacturers are nervous about trade tensions created by tariffs and the threat of additional tariffs. And they have a very compelling point.

Put simply, tariffs are not a good idea. Why? Because a tariff is a tax, and tax hikes do nothing but take money out of the pockets of business owners and hard-working Americans that could otherwise be used to grow the economy.   

The response to this is predictable and sounds something like this: “We have to impose tariffs or else China won’t stop cheating.” Or a more recent rationale: “Mexico won’t help us with immigration unless we slap them with tariffs.”

Whatever the justification, it still doesn’t change the fact that tariffs—especially tariffs that are uncertain in duration—will only weaken this otherwise strong economy. Business owners want stability and predictability, and a trade war is far from predictable.

When President Donald Trump was elected in 2016, he adopted a new posture: America is open for business, and we will do everything we can to make sure business can thrive. That wasn’t just a posture. It was followed by swift action. 

To the president’s credit, he has shrunk the regulatory burden for businesses and individuals by eliminating the harmful Clean Power Plan and leaving the devastating Paris climate accord, as well as passing historic tax reform—just to name a few highlights. 

These actions have produced incredible boons, leading to 3.1% economic growth in 2018—something many economists said was impossible—with low-income Americans benefiting the most from higher wages.

The president’s desired goal with tariffs shouldn’t have to impede the American economy from being the envy of the world, which it currently is. Getting tough with China doesn’t have to come at the expense of the gains we’ve recently seen in jobs numbers, higher wages, and more. We can have both of these without the damage and uncertainty of tariffs.

This piece originally appeared in The Daily Signal