Tight U.S. job market tests White House thinking

Employers added 138,000 jobs in May, significantly fewer than expected.

Tight U.S. job market tests White House thinking

By Gina Chon

WASHINGTON (Reuters Breakingviews) - The tight U.S. job market will challenge key tenets of President Donald Trump's policy thinking. Employers added 138,000 jobs in May, significantly fewer than expected. At 4.3 per cent, unemployment is so low that a slowdown was inevitable. Part of the problem now is a shortage of people to fill positions.

About 8.2 million baby boomers will leave the workforce through 2035, but immigrants could offset nearly 60 per cent of those losses, the Pew Research Center said in March. Without immigration, the U.S. economy will have 18 million fewer working-age residents by 2035. Yet Trump has already fulfilled several campaign promises to reduce illegal entry and deport undocumented residents. Those and other policies that discourage immigrants will ensure the workforce shrinks more than it otherwise would.

That matters because most economists reckon the United States is close to full employment. A big caveat is that the proportion of the potential workforce that is employed or looking for work declined sharply after the financial crisis and has been bumping along the bottom. This so-called participation rate slipped in May to 62.7 per cent. Remobilizing some of those potentialworkers would increase supply.

Women could be prime candidates. Their participation in the labor force has been falling since 2000, when it topped 60 per cent. It’s now at about 57 per cent. Fewer men are also active in the workforce, but with their participation rate at 69 per cent there's potentially greater scope to motivate women to work. A 2016 Gallup study found that outdated company policies and inadequate support for childcare were factors in women choosing not to work.

The White House-backed bill to replace President Barack Obama's Affordable Care Act would give states the ability to opt out of insisting that insurance covers certain health issues, including maternity and preventive services like mammograms. The Trump administration has also proposed ending an Obamacare requirement that all employers' insurance provide free birth control. Both could discourage women from seeking jobs.

Trump’s daughter, Ivanka, has lobbied for new tax deductions for childcare – a step in the right direction, but one that would mostly help the well-off. By warning immigrants off and failing to do more to encourage women to work, the president is making his own job-creation goals harder to achieve.

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