Unemployment Rate Forecast

Economic Forecasts

Jobs Market Softening Likely to Last

Kiplinger’s latest forecast on jobs

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GDP 2.6% growth in '19 More »
Jobs Job gains about 160,000 per month in '19 More »
Interest rates 10-year T-notes at 2.8% by end ’19 More »
Inflation Up 2.2% in ’19 More »
Business spending Up 5% in ’19 as global growth slows More »
Energy Crude trading from $60 to $65 per barrel in August More »
Housing 5.35 million existing-home sales in ’19, up 0.2% More »
Retail sales Growing 4.3% in ’19 (excluding gas and autos) More »
Trade deficit Widening 7%-8% in ’19 More »

New data show that recent hiring has been soft, and the downshift is likely to continue. A paltry 75,000 jobs were added in May, and hiring in March and April was revised down. Job growth in 2019 is likely to average 160,000 per month, down from 223,000 in 2018. Less hiring was likely simply because of a shortage of available workers. However, there is evidence of lower demand in a few sectors such as retail, which has shed workers for the fourth straight month. Closings of clothing stores accounted for a loss of 12,700 jobs.

Despite the softening, the labor market is still tight. Unemployment at 3.6% in May is the lowest rate since 1969. Job openings continue to exceed new hires. The short-term unemployment rate (those unemployed for less than six months) is at its lowest level since the Korean War in 1953.

Nonsupervisory workers’ paychecks rose at an annual rate of 3.4% in May. The tight labor market is putting pay growth on an upward trend.

Weaker hiring may give the Federal Reserve room to cut interest rates later this year. Chairman Powell has indicated that the Fed would step in if the recent trade war causes the economy to slow. We expect he will want to offer an “insurance” rate cut sometime this year. The Fed had been reluctant to cut rates while the labor market was so tight, for fear of overheating the economy.