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Economic Forecasts

Job Growth Downshifting but Decent

Kiplinger's latest forecast on jobs

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GDP 2.1% pace in '17, 2.4% in '18 More »
Jobs Hiring pace should slow to 175K/month by end '17 More »
Interest rates 10-year T-notes at 2.4% by end '17 More »
Inflation 2.0% in '18, up from 1.4% in '17 More »
Business spending Rising 3%-4% in '17, after flat '16 More »
Energy Crude trading from $40 to $45 per barrel in December More »
Housing Existing-home sales up 3.5% in '17 More »
Retail sales Growing 3.5% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, after nearly flat '16 More »

Moderate employment growth of 156,000 in August and 189,000 in July shows that the jobs machine that regularly spit out gains of 200,000 or more per month has likely shut down. As the labor market tightens, it should become harder for employers to find suitable candidates. Going forward, gains are likely to be around 175,000 per month.

Hiring in the construction and manufacturing industries will continue at the previous pace, but continued large gains in services employment every month has likely ended, with moderate gains expected for health care, food services, and temporary help, but little gain in retail trade.

The unemployment rate ticked up to 4.4%. This is at or below what most economists define as full employment, but it is likely that the rate will edge down a little more.

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Wage gains for nonsupervisory workers in August continued for a sixth month at around 2.3%, indicating that rising wage pressures from a tighter labor market are still a ways off. Nonsupervisory workers compose four-fifths of the workforce and tend to spend more of their paychecks, so prices and consumer spending tend to reflect their pay increases. Wages should rise faster eventually, but history shows that it takes time for low unemployment to provoke higher wage growth. Also, cost-of-living raises are fairly low these days, given the inflation rate of less than 2%.

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The effects of Hurricane Harvey are likely to reduce September job growth below 100,000, but growth in the following months will probably be higher than average as Houston workers come back. The next employment survey occurs the second week in September, when some of the more than 3 million workers in Houston and on the Texas coast will likely still be displaced. But chances are, most will be reemployed by the end of this year. A lot will depend on whether families can live in their flood-damaged houses while they are under repair. If they cannot, the 30,000 vacant apartments in the Houston area before the storm could enable most to stay local.

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Source: Department of Labor, Employment Data