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Economic Forecasts

Job Growth Becoming More Sustainable

Kiplinger's latest forecast on jobs

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GDP 2.9% pace in '18, up from 2.2% in '17 More »
Jobs Unemployment rate down to 3.8% by end '18 More »
Interest rates 10-year T-notes at 3.0% by end '18 More »
Inflation 2.5% in '18, up from 2.1% in '17 More »
Business spending Up 4% in '18, spurred by expanded tax breaks More »
Energy Crude trading from $55 to $60 per barrel in April More »
Housing Existing-home sales up 1.0%, new-home sales up 7.5% in '18 More »
Retail sales Growing 4.7% in '18 (excluding gas) More »
Trade deficit Widening 5%-6% in '18 More »

December’s 148,000 new jobs were fewer than expected, but not out of line with a tightening labor market. A decline in retail jobs reflected ongoing problems at certain brick-and-mortar chains, as well as strong holiday sales, which pushed some hiring that would normally occur in December into November. Good growth in restaurant and food-service jobs indicates consumers are feeling flush enough to eat out more. Ongoing strong hiring in construction and manufacturing is a good indicator of underlying economic strength. Export growth will keep boosting most of the manufacturing sector, but expect some layoffs in the auto industry as sales taper off.

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The slowing in monthly job growth reflects a shrinking labor force. Since peaking at 250,000 per month in 2014, the economy has added fewer jobs each year as the pool of workers has steadily shrunk because of flat population growth. Expect 2018 to add an average of 160,000 jobs monthly, down from 171,000 in 2017.

Unemployment held at 4.1% in December. Look for 3.8% by the end of 2018 as it becomes harder for employers to find suitable candidates. The short-term unemployment rate (less than six months) has fallen to its lowest level in 65 years.

Further proof of a tightening labor market is evidenced by lots of job openings in certain sectors, including heath care, food services, construction, transportation and warehousing. Openings in health care and food services are at their highest level in 15 years.

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But worker scarcity has not translated into fatter paychecks yet. December wage gains were only 2.3% for nonsupervisory employees and 2.5% for all employees. Wage growth has been stuck around 2.5% for a couple of years. However, expect it to pick up in 2018, likely reaching 3% by the end of next year.

See Also: The Best Jobs for the Future

Source: Department of Labor, Employment Data