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Economic Forecasts

Workers Are Getting Harder to Find

Kiplinger's latest forecast on jobs

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GDP 2.9% pace in '18, up from 2.3% in '17 More »
Jobs Slower job gains likely this year as labor market tightens More »
Interest rates 10-year T-notes at 3.3% by end '18 More »
Inflation 2.6% in '18, up from 2.1% in '17 More »
Business spending Up 7% in '18, boosted by expanded tax breaks More »
Energy Crude trading from $65 to $70 per barrel in July More »
Housing Price growth: 5.0% by end of '18 More »
Retail sales Growing 4.4% in '18 (excluding gas and autos) More »
Trade deficit Widening 5%-6% in '18 More »

A moderate job gain of 164,000 in April is likely the new norm for the year. Job growth is still widespread, but increases are just a bit smaller than they were last year. That is expected as the labor market tightens and workers become scarce. The average monthly expansion has gradually diminished since peaking at 250,000 in 2014.

Unemployment dropped to 3.9% in April from 4.1% in March, its lowest level since 2000. Look for it to edge down a bit further by the end of 2018 as it becomes harder for employers to find suitable candidates. The short-term unemployment rate (those unemployed for less than six months) is at its lowest level since 1969, as are monthly initial unemployment claims. Few companies are laying off in this climate.

Wage growth is stable at 2.6%, but expect it to advance to a 3% rate by year’s end. It usually takes a while for wage hikes to catch up to falling unemployment. Compensation for harder-to-find high-skill workers tends to rise first, but that for workers in other sectors typically comes along as well, eventually.

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Some are concerned that higher wage growth will stoke inflation. This is possible, but generally doesn’t happen right away. Some businesses will not be able to raise their prices and will likely have to accept reduced profits.

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Further proof of a tightening labor market is evidenced by lots of job openings in certain sectors: Construction, food services, health care, transportation and warehousing. Openings in health care and finance are at their highest levels in 17 years.

See Also: The Best Jobs for the Future

Source: Department of Labor, Employment Data