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Economic Forecasts

Job Growth Strong, Wage Growth Still Stuck

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 1.4% in '17, down from 2.1% in '16 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 »

The labor market is still going strong, with 209,000 jobs added in July and 231,000 in June. As the labor market tightens, it should become harder for employers to find suitable candidates. However, it appears that a surge of folks coming back into the labor force to look for work is extending the period of better than 200,000 monthly gains. We still expect monthly job gains to slow to 175,000, on average, by the end of the year.

Industries that have been doing well continued to do well. Mining added jobs for the ninth month in a row. Health care, professional and business services, and restaurants continued their strong hiring activity. Food services hiring should slow down in the near future, given slowing sales growth, but has not so far. Temporary help continued to grow, which is a positive indicator of overall labor demand. Retail employment as a whole managed a small gain, but clothing store employment fell by 10,000 positions, likely the result of store closure at some chains.

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The unemployment rate ticked down to 4.3% on the hiring surge. 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.

Wage gains for non-supervisory workers in June continued for the seventh month in a row at 2.4%, indicating that rising wage pressures from a tighter labor market are still a ways off. Non-supervisory 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 less than 2% inflation rate.

See Also: The Best Jobs for the Future

Source: Department of Labor, Employment Data