President Donald Trump's chief economic adviser says Friday’s blockbuster unemployment report is a sign of the robust economic growth awaiting America.
“I believe we've entered into the longest largest prosperity in a couple of decades. I know it's early in the game,” Larry Kudlow, director of the White House's National Economic Council, told CNBC.
To be sure, U.S. job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8 percent, pointing to rapidly tightening labor market conditions, which could stir concerns about inflation, Reuters explained.
The closely watched employment report released by the Labor Department on Friday also showed wages rising solidly, cementing expectations that the Federal Reserve will raise interest rates this month.
Nonfarm payrolls increased by 223,000 jobs last month as warm weather boosted hiring at construction sites. There were also big gains in retail and leisure and hospitality payrolls. The economy created 15,000 more jobs than previously reported in March and April.
“This is a prosperity era. It's a strong economy. What you've got here is continued job growth, low unemployment, and participation rates pretty good,” said Kudlow, who served as the Trump campaign's senior economic adviser.
The strong employment report added to a string of recent upbeat economic data, including consumer spending and industrial production, that have suggested economic growth was regaining speed early in the second quarter after slowing at the beginning of the year.
The strength comes even as the stimulus from a $1.5 trillion income tax cut package and increased government spending is yet to filter through the economy. Renewed fears of a trade war after the Trump administration imposed tariffs on steel and aluminum imports from Canada, Mexico and the European Union, however, cast a dark cloud over the economic outlook, Reuters has explained.
Meanwhile, the veteran financial guru and former Ronald Reagan adviser explained that business investment “is coming alive.”
The economic factor of capital expenditures, commonly called “capex” has experienced a resurgence under Trump, said Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985.
‘It was flattened in 2015. It was flat in 2016. It was up significantly in 2017, Kudlow explained
“Here in the spring of 2018 most of these numbers for capex are showing six, seven, sometimes eight percent gains,” he said.
Such robust economic growth will also lead to higher pay for workers, he predicted.
“If you're going to invest equipment, technology, buildings, whatever, the demand for labor goes up and their wages go up,” said Kudlow.
“I don't think we're anywhere near the end we're at the beginning this could going on for a bunch more years, in my judgment.”
Last month’s one-tenth of a percentage point drop in the unemployment rate pushed it to a level last seen in April 2000. The jobless rate is now at a level that the Fed forecast it would be at by the end of this year.
Average hourly earnings rose eight cents, or 0.3 percent last month after edging up 0.1 percent in April. That lifted the annual increase in average hourly earnings to 2.7 percent from 2.6 percent in April.
Other experts agree with Kudlow's optimistic outlook.
"Overall, the U.S. economy looks strong,” said Paul Ashworth, chief economist at Capital Economics in Toronto. “In that environment, we still expect the Fed to hike interest rates an additional three times this year.”
(Newsmax wire services contributed to this report).
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