The benefits tax_reform was supposed to give to US_employment and wages are evaporating

Last month’s employment report opened the way to optimism, but the March report swept it away. Job creations were very low, at 103,000, vs. an expected level of nearly 200,000, and new jobs in the first two months were revised down by 50,000 on average. Not only this, but wage increases are showing fewer and fewer signs of recovery. With the exception of finance, wage increases were down in most cases compared with last year or stationary at levels below the national average, which, as a result, is showing no sign of improvement. At 1.7% year-on-year in March, hourly wages in manufacturing increased at half their rate of mid-2016. The leisure and hotel sector, the nation’s third-largest employer segment with more than 10% of all positions, wages are now rising by less than 3% vs. 4.5% in the middle of last year. Although these results remain difficult to explain, they are certainly far removed from expectations, and neither the markets nor an administration tempted by protectionism can long ignore them.

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Protectionism does not necessarily go hand-in-hand with inflation

The aggressive protectionist measures announced by the US president over the past few days have generally been perceived as a prime inflationary threat. The reasoning is rather logical. An increase in import tariffs on non-substitutable goods that enter the production processes of key economic sectors or are purchased directly by US consumers will cause the price of those goods to rise. In addition, (i) the US balance of payments is likely to deteriorate and push down the dollar, and this might be exacerbated by potential difficulties in external financing, and (ii) the rest of the world might retaliate against the announced US measures, creating a domino effect. In theory, this combination is the perfect inflationary cocktail. How then can we explain that the markets have not shown greater expectations of inflation?

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