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Economic Forecasts

Fewer Jobs in February, Tighter Labor Market

Kiplinger’s latest forecast on jobs

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GDP 2018 growth is 2.9%; 2.5% for 2019 More »
Jobs Job gains will be around 180,000 per month in 2019 More »
Interest rates 10-year T-notes at 3.0% by end ’19 More »
Inflation 2.2% in ’19, up from 1.9% in ’18 More »
Business spending Up 5% in ’19 as global growth slows More »
Energy Crude trading from $55 to $60 per barrel in June More »
Housing 5.35 million existing-home sales in ’19, down 0.4% More »
Retail sales Growing 4% in ’19 (excluding gas and autos) More »
Trade deficit Widening 7%-8% in ’19 More »

A correct picture of the labor market often requires averaging job-gain numbers over several months. A miniscule 20,000 were added in February, but January’s very strong 311,000 new jobs suggests that some February hiring was pushed up. Also, near-record cold weather at the end of January likely reduced reported February employment in construction, retail, and food service.

Monthly job gains this year will likely average around 180,000 as low unemployment makes it more difficult for employers to find qualified workers.

The labor market is tightening again. Unemployment dropped to 3.8% in February. The rate should drift down to 3.4% by the end of 2019. Hiring demand will likely outstrip the number of new entrants to the labor force. The short-term unemployment rate (those unemployed for less than six months) is close to its lowest level since the Korean War in 1953. The number of part-time workers looking for full-time work also fell to its lowest level in more than 10 years.

Nonsupervisory workers' paychecks rose at an annual rate of 3.5% in February. Pay growth is on an upward trend, another indicator of a constricting labor market.

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A tightening labor market would normally invite interest rate hikes from the Federal Reserve, but the Fed will hold off until at least mid-year. Because of slowing overseas growth, the Fed has promised "patience," which is being taken to mean that the central bank won’t doing anything for a while. The Fed also likely wants to get a better read on the economy after the government shutdown delayed economic data reports.