The Labor Department’s monthly jobs report released last week suggests that the economy ended 2019 on a steady footing, the New York Times reported last week. The American labor market “still shows few signs that it is running out of breath.”
Payroll gains in December capped a year of steady but slowing gains in employment, the government said, nudging the year’s total past 2.1 million jobs. That was fewer than 2018’s additions but more than enough to outpace population growth.
“We had relatively strong and steady job growth over the year despite a number of headwinds including a trade war with China, weaker global activity and heightened policy uncertainty,” Gregory Daco, the chief United States economist at Oxford Economics, said. Employers added 145,000 workers in December.
Looking ahead, Daco said the nation’s job machine was likely to crank down further. “I know it’s hard to get accustomed to,” he said, adding that he expects average monthly job growth to fall to 125,000 from 175,000 last year. “But that’s still enough to provide for a stable unemployment rate and provide for people coming back into the labor force.”
One discouraging piece of the Labor Department’s monthly report was anemic wage growth. “It’s easier to get a job than a raise in this economy,” said Diane Swonk, chief economist at Grant Thornton.
Consumer spending is a pillar of the economy, and it depends on income growth. Over the past 12 months, wages grew just 2.9%. That was substantially below the 3.3% average in 2018. “Something that the Fed has been humbled by is how little wage acceleration there’s been,” Swonk said, referring to the Federal Reserve.
Even so, the report is unlikely to push policymakers at the central bank from their wait-and-see approach on further cuts to its benchmark interest rate.
The labor squeeze has helped workers at the lowest end of the pay scale, giving their wages a push that exceeds the average increase. By contrast, wage growth for managers slowed in December. Limp wage growth is puzzling when the jobless rate has settled at 3.5%, a half-century low. Finding qualified workers was the top challenge cited by small-business owners in December, according to a monthly survey by the National Federation of Independent Business.
What the tightening labor market has done, though, is draw in people who were not previously job hunting. Nearly three-quarters of new hires have come off the sidelines.
The unemployment rates for groups that have tended to receive a smaller share of the expansion’s rewards, including high school dropouts, African-Americans and Latinos have also dipped since December 2018.
The share of the population in the work force remains at the top of the post-recession range, even though it’s lower than before the financial crash of 2008. Many of the new entrants have been women, who now make up a majority of the nonfarm payroll for the first time in nearly a decade and dominate sectors that are expanding fastest, like health care.
Job totals, of course, can mask wide differences based on location, skills and industry. And finding stable jobs that pay middle-income wages, offer benefits and a regular schedule can be difficult. Health care and hospitality, leisure, professional and business services flourished last year.
Mining and manufacturing both struggled. Industrial goods and automobile manufacturers were the hardest hit, in part because of the trade war, said Andy Challenger, a vice president at Challenger, Gray & Christmas, an outplacement firm that tracks layoff announcements.
Because the company’s survey tracks layoff announcements, Challenger said, it’s “a bit more forward looking” than the Labor Department’s figures. Plans can change, he noted, but the results “point to sentiments, if they think they’re going to cut.”
Boeing, as well as the aerospace industry on the whole, is still reeling from the aftermath of two accidents. Boeing said on Friday that it would lay off 2,800 people in response to Boeing’s decision to suspend production of that jet.
The manufacturing sector is particularly sensitive in this political context and “especially in an election year, the trajectory is going to be important,” said Rubeela Farooqi, chief United States economist for High Frequency Economics.
There has been some progress on the trade front: The United States and China are expected to sign an agreement on the first phase of talks this week. But persistent uncertainty, which nudges businesses to be more cautious in hiring and investment, is far from clearing. Two-thirds of Chinese imports, worth $360 billion, are still subject to tariffs. And more tariffs on imports from Europe could be imposed this month.
Julia Pollak, a labor economist for the employment site ZipRecruiter, said the combination of strong wage and job growth had been concentrated in nine states. In the top four, which are Utah, Nevada, Arizona and Colorado, the expansion has been driven by the technology industry. Those states have benefited in part because they have lower housing costs than Silicon Valley, Ms. Pollak said.
So, we will see. Certainly the trends in job creation are fundamental to economic growth and these trends should be watched especially closely as they proceed, Washington Insider believes.