Wall Street economists are at odds over the cause of a significant slowdown in US job growth, a disagreement that has major implications for the broader economic outlook. Some analysts believe the hiring pullback is primarily due to a reduced supply of available workers, partly attributed to the Trump administration’s immigration policies. Others contend that the slowdown is driven by a more worrying decline in demand for labour.
The differing viewpoints are crucial. If the primary obstacle is a scarcity of workers, then weak hiring figures may not necessarily signal broader layoffs, and the Federal Reserve could maintain high interest rates. However, if hiring is slowing mainly because of weakening labour demand, this would likely necessitate intervention by the central bank.
“Whether what we’re seeing is all immigration effects or if it’s true demand effects is definitely the key question,” stated Veronica Clark, an economist at Citigroup Inc. “There very likely are some immigration effects in the data, but details also suggest weaker demand unrelated to immigration, which seems to be getting worse.”
The latest jobs report from the Bureau of Labor Statistics, released on August 1, took financial markets by surprise, revealing weak hiring numbers for July and substantial downward revisions for the preceding two months. The unexpectedly poor data led to President Trump firing the head of the BLS, accusing the agency, without providing evidence, of manipulating the figures to portray him negatively.
