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Economic Forecasts

Job Growth Looking Better, Wage Growth Not

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 1.3% 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 September More »
Housing 5.5% price growth by end of '17 More »
Retail sales Growing 3.5% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, after nearly flat '16 More »

Good growth — 222,000 new jobs in June and upward revisions to May and April figures — paint a rosier picture of the labor market. This momentum may extend the time of strong job growth. However, monthly job gains are still expected to slow to 175,000, on average, by the end of the year. As the labor market tightens, it becomes harder for employers to find suitable candidates.

The upticks in retail and government sectors were a surprise. Department stores and other general merchandise purveyors added 12,200 jobs, breaking a four-month string of losses. However, this positive news is not likely to last. Local governments filled a boatload of positions, but government hiring surges tend not to be sustained.

Industries that have been doing well continued to do well. Mining added jobs for the eighth month in a row. Health care, professional and business services, and food services continued their strong hiring activity. Restaurant hiring should be slowing down, given sluggish sales growth and higher minimum wages in some localities.

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The unemployment rate ticked up to 4.4%, as more folks who had given up on job hunting responded to the strong hiring activity by looking for jobs again.

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Wage gains for nonsupervisory workers in June slipped to 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. Stronger wage growth should happen eventually, but history shows that it takes time for low unemployment to provoke higher wage growth. Also, cost-of-living raises are fairly low because the inflation rate is less than 2%.

See Also: The Best Jobs for the Future

Source: Department of Labor, Employment Data