Excerpt from the 2Q18 Witten Advisory: The federal government has certainly launched policies that have helped lift economic growth, not just the new tax law but also reducing regulation across industries. The economy’s strength has also led the Fed to raise short-term rates, and one key reason that the Fed is more confident about raising short-term rates is the health of the labor market.
As the grey line at the top of the above chart displays, payroll gains have accelerated this year from a 2 million annual rate to almost 2.4 million as of May. After the 3Q hurricane-induced slowdown last year, quarterly employment growth rebounded in 4Q and surged in 1Q18 as well, which produced the biggest consecutive quarterly gains since late 2015/early 2016. That momentum continued into 2Q, so that 2018 has averaged 207,000 new jobs per month.