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Trump administration leaves room for uncertainty in economy, despite 'very solid' jobs report

Key Points
  • Nonfarm payrolls rose by 222,000 in June, exceeding economists' forecasts.
  • Jan Hatzius of Goldman Sachs says the Trump administration's protectionism could lead to "a negative supply shock."
Goldman Sachs' Jan Hatzius: We will see a rebound in wage growth

A "very solid" jobs report for June justifies a sense of confidence in the economy, but questions surrounding the Trump administration's policies leave the future less certain, economists say.

The economy created 222,000 nonfarm payrolls in June, the largest increase since February, while the unemployment rate stayed near historic lows at 4.4 percent, according to Friday's report from the Bureau of Labor Statistics. The high number of jobs added beat a prediction by Thomson Reuters economists by more than 40,000 jobs.

"It's a very solid report in terms of what it says about growth in the economy," said Jan Hatzius, chief economist at Goldman Sachs.

While the economy continues to strengthen under President Donald Trump, Hatzius said the president's protectionist trade policies could hamper some of that growth.

If Trump imposes heavy tariffs, "one should assume retaliation" in the form of a trade war with other countries, Hatzius said Friday on CNBC's "Squawk on the Street."

"So I think if you get an increase in tariffs in the U.S. and abroad it's basically a negative supply shock," he said.

"You can construct a scenario where certain groups of workers benefit for sure, but it's pretty hard to believe that you can protect your way to prosperity," Hatzius said.

Business confidence spiked following Trump's victory in the 2016 presidential election, and that optimism has stayed relatively constant throughout 2017, according to a series of surveys on small-business confidence from the National Federation of Independent Businesses.

John Silvia, Wells Fargo chief economist, said the similar year-over-year job-growth patterns between 2016 and 2017 suggest that Trump doesn't deserve credit for the growing economy.

"It's the same economy whether it's a Democrat or a Republican in power, and you're creating basically the same pattern of job gains that you did last year and this year," Silvia said on "Squawk on the Street."

Regardless of policy, the president's difficulty maintaining his composure is leading to "storm clouds on the horizon," said Chris Lu, deputy Labor secretary under former President Barack Obama.

While the president's legislative agenda on repatriation, tax reform and health care may have trouble getting through the Hill, Lu said the president is his own worst enemy.

The problem is "the president having the kind of discipline to push forward on his agenda, not creating the kind of self-inflicted wounds that we've seen over the past six months," Lu said on "Squawk on the Street."

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