Job Market Powers Ahead, but Consumer Sentiment Falls to New Low

NurPhoto
By Yuval Rosenberg and Michael Rainey

President Trump has reportedly agreed to fire Food and Drug Administration Commissioner Marty Makary, though the plan is not yet final. Makary has faced criticism from officials in the Trump administration and the pharmaceutical industry over his leadership of the health agency and his handling of drug approvals and a push to limit access to the abortion pill mifepristone. Makary has reportedly sparred with the White House at times and angered Trump by not moving quickly enough to approve fruit-flavored vape products.

Here's what else is happening.

Republicans Score Major Victory in Redistricting Battle as Court Strikes Down Redrawn Virginia Map

The Virginia Supreme Court delivered a major blow Friday to Democrats' efforts to keep pace with Republicans in the partisan race to redraw congressional maps ahead of November's midterm elections. In a 4-3 decision, the court struck down a voter-approved redistricting plan that was expected to net Democrats four more seats in the House of Representatives, ruling that the legislative process used to put the measure on the ballot violated state law.

"Huge win for the Republican Party, and America, in Virginia," President Trump wrote on his social media site.

The ruling leaves Republicans with a clear edge in the extraordinary mid-decade gerrymandering battle that Trump started last year and bolsters the party's hopes of maintaining control of the House. The GOP is now rushing to expand its advantage across the South after a U.S. Supreme Court decision last week gutted much of the 1965 Voting Rights Act.

Democrats vowed to continue their fight.

"The decision to overturn an entire election is an unprecedented and undemocratic action that cannot stand," House Democratic Leader Hakeem Jeffries, who has been leading the party's redistricting fight, said in a statement. "We are exploring all options to overturn this shocking decision. No matter what it takes, House Democrats will win in November so we can help rescue this nation from the extremism being unleashed by Donald Trump and Republicans."

Strong Job Gains in April as Unemployment Rate Holds Steady

U.S. employers added 115,000 jobs and the unemployment rate remained at 4.3% in April, the Labor Department reported Friday. The job growth numbers were better than expected and indicate that the labor market is maintaining a modest momentum despite growing headwinds from rising fuel prices and continued uncertainty around President Trump's tariff policy.

Continuing a trend, healthcare contributed a big chunk of the job growth, as the sector and related social assistance employers added nearly 54,000 jobs. Transportation and warehousing companies added about 30,000 positions, while retail added nearly 22,000 and leisure and hospitality added 14,000.

Not every sector registered gains, especially those affected by the growing use of artificial intelligence. The information sector shed 13,000 jobs, and finance cut 11,000. Manufacturing employment shrank, too, with a decline of 2,000 jobs.

Some groups of workers showed signs of stress. The unemployment rate for Black workers rose to 7.3%, up two-tenths of a percentage point and roughly twice the rate of unemployment for white workers (3.7%). And the U-6 unemployment rate, which includes those working part-time who would prefer to work full-time as well as those who have been too discouraged to actively look for a job, rose to 8.2%, up from 8.0% in March. That's the highest level since December and more than one percentage point higher than the period leading up to the Covid pandemic.

Taking credit: The White House claimed credit for the solid job numbers. "The April jobs report smashing expectations thanks to robust private-sector growth is yet another sign that the American economy remains on a solid trajectory under President Trump," White House spokesperson Kush Desai said on social media, adding, "Americans can rest assured that the best is yet to come."

What the analysts are saying: Most economists say it's too early to declare that the labor market has recovered from its tariff-driven slowdown last year, but the April report is clearly good news. "We'll need to see a couple more months of this; it has been volatile," said Matthew Martin, senior economist at Oxford Economics, per The New York Times. "But if we see sustained growth, obviously that would be a major positive for the economy."

Economist Olu Sonola of Fitch Ratings said the April jobs report shows impressive signs of resilience. "The labor market is not booming, but it is proving harder to break than many feared," he said, per the Associated Press.

The "clear upside surprise" is welcome, especially in the current geopolitical context, said Eric Merlis, co-head of global markets at Citizens Bank. "Importantly, the data suggests the hostilities in the Middle East have had little visible impact on the U.S. job market," Merlis said in a research note, per Politico.

Looking at the longer-term trend, economists at Goldman Sachs estimate that the underlying pace of job growth now stands at about 51,000 per month, close to the level they say is needed to hold the unemployment rate steady.

Risks ahead: There are reasons to believe that there could be more turbulence ahead, especially if the Strait of Hormuz remains closed due to dueling blockades by Iran and the United States, and the price of energy remains elevated. "I didn't expect [high gas prices] to impact job creation in April, and I don't expect it to in May, but it will show up in the summer months should the war continue," RSM Chief Economist Joe Brusuelas told The Washington Post.

Another potential source of friction is the influence of artificial intelligence on employment. According to the outplacement firm Challenger, Gray & Christmas, AI was cited as a factor by businesses in 26% of the layoffs in April, with the largest share occurring in the technology sector, CBS News reports. Those numbers are expected to grow as the use of AI encroaches upon more and more white-collar jobs.

Another looming source of trouble is inflation, which is expected to continue moving higher as soaring energy costs make their way through the economy. Navy Federal Credit Union Chief Economist Heather Long noted that while wage growth has been a solid 3.6% over the last year, inflation is expected to approach 4%. "Inflation is about to eat up wage gains," she said on social media.

Consumer Sentiment Hits Another Record Low

Consumer sentiment fell to another record low in the University of Michigan's preliminary survey for May. The Michigan sentiment index edged down from 49.8 for April to 48.2 in May. Consumer expectations for the next year grew a bit more optimistic, but views of the current state of the economy worsened as did people's concerns about their personal finances.

"While the expectations index inched up, current conditions fell back about 9%, owing to a surge in concerns about high prices both for personal finances as well as buying conditions for major purchases," survey director Joanne Hsu said in a statement. "About one-third of consumers spontaneously mentioned gasoline prices and about 30% mentioned tariffs. Taken together, consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump."

Quote of the Day: A GOP Path to Social Security Privatization?

"Here's the dirty little secret: Trump Accounts are Social Security personal accounts."

  • Republican Sen. Ted Cruz of Texas, as quoted by The Hill, arguing at a panel discussion at the Milken Institute's Global Conference in Los Angeles earlier this week that the new Trump Accounts for newborns could be a step toward privatizing Social Security.

The new accounts promise to provide every American baby born between 2025 and 2029 with $1,000 to be invested in a diversified index of U.S. stocks. The accounts get rolled into traditional IRAs when the child turns 18.

Cruz was behind the legislation creating the new Trump Accounts.

"How did we get it done?" he asked at the panel this week. "You remember George W. Bush tried this in his second term and, sadly, Congress ran for the hills in a display of extraordinary cowardice. How did we get it done this time? It's because we gave the money to babies so the old people didn't get p---ed."

He reportedly went on to note that those babies will grow up - and the Trump Account balances will grow, too, with the gains ultimately leading in more Americans being willing to have their Social Security payroll taxes directed toward personal accounts.

"We're going to be able to go to parents and say, 'Hey, you know that Trump Account your kid has that you keep seeing the numbers go up and you're seeing this compound growth, wouldn't you like to be able to keep a portion of your tax payments that you're paying already, and instead of sending it to Uncle Sam, wouldn't you like to have a Trump Account just like your kid does?'" Cruz reportedly said.

Fiscal News Roundup

Views and Analysis