As stocks endure their worst correction since 2011, and the battle between the Federal Reserve's doves and hawks rages on over a quarter-of-a-percentage-point rate hike, the much-anticipated August employment numbers made for a surprisingly mediocre report.
Nonfarm payrolls came in below consensus at 173,000. But private payrolls increased only 140,000, their smallest gain in five months. Compared with the average post-1960 recoveries, private-sector jobs are nearly 6 million below that long-run trend line.
The best parts of the report were a rise in average hourly earnings and a gain in aggregate hours worked. Putting the two together, labor-wage income over the past year is running at about 5 percent and, since there's no inflation, that could sustain real consumer spending. This is good news.
Yet earlier in the week the ISM Manufacturing report was soft. Inside that survey, new orders were especially soft. It's a sign that business-investment spending will remain the weakest part of the economic recovery.
All of which allows me to make my usual pleas: Can we please slash the corporate tax rate from 40 percent to 15 percent, allow full expensing of investment, stop the double tax on multinational profits, and be sure the small-business S Corporations can pay the new lower rate? A deep corporate tax cut would be the single most stimulative policy measure. It would turn a 2.5 percent growth economy into a 4-plus percent growth economy.
But back to the Fed. What are they going to do? No one knows. If it were up to me they would do nothing.