This jobs report bolsters confidence in the MAGAnomic prediction shared two years ago. So long as current economic trends continue, the explosion in private sector wage rates, middle-class wages, will begin around Q2 of this year (April – June). Once the eight year Obama-labor-lag is fully absorbed, a tighter job market will put upward pressure on real wages.
The Main Street economic engine, the “real economy”, is now positioned to overtake the Wall Street engine, the “paper economy”. Meaning actual profits and losses, real economic GDP growth, will drive company earnings and valuations in 2018.
There is an economic policy synergy now taking place. The tax package that was passed shows how President Trump’s economic policy drivers (Ross, Cohen, Mnuchin) have structured Main Street businesses to willingly afford the wage rate increases.
The MAGAnomic dynamic is two-fold. The tax rates for the middle-class have dropped; simultaneous to this tax change increasing take home pay, the business sectors will have room to drive actual hourly wage rates higher. Lower rates and higher wages has a compounding impact on the amount of money in workers paychecks/pockets. See how that works?
[CNBC] The total brought 2017’s private payroll growth as gauged by ADP and Moody’s to 2.54 million, an average of 212,000 a month.
Job growth was broad based, as professional and business services led the way with 72,000 new positions. The education and health services sector was next at 50,000 and trade, transportation and utilities contributed 45,000. Wall Street-related payrolls grew by 19,000.
[…] By size, businesses with between 50 and 499 employees added 100,000 jobs while small firms hired 94,000 and large companies contributed 56,000 to the total.
“The job market ended the year strongly,” Moody’s chief economist Mark Zandi said in a statement. “Robust Christmas sales prompted retailers and delivery services to add to their payrolls. The tight labor market will get even tighter, raising the specter that it will overheat.”
Overall, service-related companies were responsible for the balance of jobs, with 222,000 new hires. Goods-producing industries added the rest, with construction growing by 16,000 and manufacturing by 9,000.
The private payrolls numbers come a day ahead of the government’s closely watched nonfarm payrolls report. (read more)
The bottom line is how the MAGAnomic policy builds upon itself. As middle-class workers have more disposable income they buy stuff. Consumer spending drives GDP growth.
Higher middle-class wages mean U.S. consumers are no longer dependent on cheap foreign manufactured products. This boosts the investment outlook for U.S. manufacturing. The business cost dynamic shifts from the perspective of the U.S. as a service economy and the outlook becomes a balanced production economy.
President Trump’s MAGAnomic policy is breaking the historic cycle of low wages and cheap import product dependency.
Exactly as planned.
NOW, PLEASE WATCH:
See how that works?