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Economic Forecasts

Strong Jobs Growth Lasting Longer than Expected

Kiplinger's latest forecast on jobs

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GDP 2.1% growth in ’17, following 1.6% in ’16 More »
Jobs Hiring pace should slow to 160K/month in '17 More »
Interest rates 10-year T-notes at 3% by end '17 More »
Inflation 2.5% in '17, up from 2.1% in '16 More »
Business spending Rising 3%-4% in ’17, after flat ’16 More »
Energy Crude oil trading from $55 to $60 per barrel in May More »
Housing Single-family starts up 10% in '17 More »
Retail sales Growing 4.2% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, after nearly flat '16 More »

Employment surged for the second straight month in February: 235,000 jobs added, following January’s gain of 238,000. Gains over 200,000 are noteworthy this year because the labor market has tightened, and workers are harder to find. But with more unemployed folks coming back into the labor market looking for jobs, employers still have options for hiring the workers they need.

The unexpected strength in job gains is likely to make the Federal Reserve more confident that the economy is strong enough to handle an interest rate hike when it meets on March 15.

The unemployment rate edged down to 4.7%, as some of the formerly unemployed found jobs. The number of long-term unemployed folks declined, and the number of those working part-time who wanted to work full-time fell as well.

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Most industries added jobs in February, with strong growth in health care, private education, business services, food services and construction. The mining and manufacturing sectors also strengthened. Retail showed weakness, but that followed a robust January. The strong pickup in construction jobs could be linked to a warm February in the Northeast. If so, then there may be a downward move in the sector in March.

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Look for the job market to continue tightening this year as demand for skilled workers exceeds their availability. Employment growth in 2017 should slow to an average of 180,000 jobs per month, from 187,000 per month in 2016, but the unemployment rate will edge down further to 4.5%. The four-week average of initial unemployment claims is still near its lowest level since 1973, limiting the additions from this source to the ranks of the unemployed.

Wage gains for nonsupervisory workers stayed at a 2.4% growth rate in January. Nonsupervisory workers comprise four-fifths of the workforce, and their wage gains are more likely to be reflected in prices and consumer spending. Adding in supervisors and executives, hourly earnings picked up to a 2.8% rate.

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Source: Department of Labor, Employment Data