While the stock market continues to climb at inexplicably increasing rates, the job market had a bit of a slowdown in December, as Friday’s monthly report showed us.
Total nonfarm payroll employment increased by 148,000 in December, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in health care, construction, and manufacturing….That’s still pretty good, and the uptick in hourly earnings is welcome, which means December may break the 4-month streak of falling real wages that we have had.
In December, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents to $26.63. Over the year, average hourly earnings have risen by 65 cents, or 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.30 in December.
The change in total nonfarm payroll employment for October was revised down from +244,000 to +211,000, and the change for November was revised up from +228,000 to +252,000. With these revisions, employment gains in October and November combined were 9,000 less than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 204,000 over the last 3 months.
For the full year, job growth was still a solid 2.06 million, although that was a drop of 185,000 from 2016. Rick Newman of Yahoo! Finance noted that leveling off in job growth could be expected with a mature economic expansion that’s near full employment.
Instead, the trendline actually represents a fairly predictable cycle as the economy began to recover from the deep recession that ended in 2009. Job growth peaked in 2014 not because of any specific Obama policy, but because employers simply needed to hire people to keep up with demand, after shrinking dramatically during the recession. And job growth is now slowing as most people who want a job have found one, with employers starting to face labor shortages.So hope you enjoy the “Trump Boom” while it’s still going on, because any acceleration in growth will likely be gone in 6 months. Or it could be sooner than 6 months, depending on when the stock market Bubble pops and when people realize their take-home pay or refunds won’t be very different in 2018.
The most important implication for 2018 is probably this: We’re in the late stages of an economic expansion, and job creation could continue to slow. That’s not necessarily bad. “The biggest problem of the American labor market is becoming too few workers rather than too few jobs,” economist Russell Price of Ameriprise wrote to clients recently. “We expect the pace of job growth to slow in 2018 simply due to the fact that there are fewer people available to be brought back into the job market.”
With the job market tightening, economists expect wages to rise. But they’ve been expecting that to happen for a while, and they’ve been wrong. Wages grew just 2.5% in 2017, and with inflation at 2.2%, that means workers, on average, are barely getting ahead. Wage growth of 3% to 4% would be more assuring. If there’s an upside, it’s that tepid wage growth lets the Federal Reserve keep interest rates lower for longer, which is generally good for businesses.
Job growth matters because it helps determine how quickly the overall economy grows. GDP growth should be around 2.5% this year, which isn’t terrible, but it’s obviously below the 3% to 4% growth rate Trump—and many economists—would like to see. Moody’s Analytics predicts GDP growth will hit 2.8% in 2018, partly because the tax cuts Trump just signed into law will provide a bit of fiscal stimulus. But it will fade quickly. Moody’s Analytics predicts just 2.2% growth in 2019. And the firm’s chief economist, Mark Zandi, recently told Yahoo Finance the next recession could hit around 2020.
And while job growth was still decent in 2017, it's actually the lowest number of new jobs in 7 years.
Somehow I don’t think the president* will be mentioning that in his “look at our great economy” tweets. And the scary part to me is that I don’t see how it gets any better in 2018 until wages rise- especially since the Piece of Shit tax bill has incentivized stock buybacks, and job and wage cuts because of the lower tax rates on profits.
But hey, at least the December jobs report wrapped up another year of solid job growth and lower unemployment. Enjoy it while you got it, I suppose.