US Jobs Growth Losing Steam
The US Federal Reserve has a two day meeting down for the end of this month, but don’t expect any change in US interest rates after the slightly weaker figures for December and 2017. The weaker description is of course all relative to previous years, but a slowing trend in the great 9 year US economic rebound is now clear.
With December’s 148,000 new jobs, growth for 2017 totalled 2.06 million — the first year of Donald Trump’s presidency - which was less than the 2.24 million created in 2016 in President Obama’s final year.
While Mr Trump has taken credit for revving up economic growth — which expanded at its fastest pace in 2 years in the third quarter — jobs growth in 2017 was also well under the near 3 million created in 2014 which was the peak year for new jobs.
On a monthly basis the slowing pace of jobs creation from 2014 can be seen:
- 2017: 171,000
- 2016: 187,000
- 2015: 226,000
- 2014: 250,000
- 2013: 192,000
- 2012: 179,000
- 2011: 174,000
- 2010: 88,000
The slowing trend in jobs growth since 2014, indicates the US economy is nearing full employment - but with wages growth still moderate and inflation short of the Fed’s 2% target now for almost 6 years.
Early estimates for 2018 put monthly jobs growth around 150,000 or about 1.8 million - although some forecasts are above 2 million, and even as high as 2.4 million. On a percentage basis most forecasters see the rate dipping under 4% and averaging 3.9% for the year ahead.
Markets believe the Fed will lift rates three times in 2018 with the first tipped for the Fed’s March meeting. The very cold weather in January for much of the country will impact jobs as similar conditions did in early 2014 and 2016. ha could push a possible rate rise further into 2018.
US wages were up 2.5% in 2017, about the same annual gains as the previous two years. The percentage of working-age Americans in the labor force remained at 62.7% last month, near a four-decade low. Australia’s rate is more than 65%. Our jobless rate is 5.4% (the US rate is 5.4%) - the same as Germany’s after a record year in 2017.
Gary Cohn, the top economic advisor to Donald Trump said Friday that he wanted monthly job growth of more than 200,000. The corporate and individual tax cuts that took effect on Monday (of last week) will help push hiring back up to that level this year and spur higher worker pay.
He told Bloomberg TV: “We see the economy continuously growing and continuously adding jobs, and remember tax reform is now five days old and the input that that’s going to have into the economy is … just barely starting to have an effect,” Cohn said. “We are committed to real wage growth and we do believe you’ll see it over the course of the next year or two.”
US workers have enjoyed small real gains in wages in the past three years - inflation has been less than 2% and wages growth has averaged 2.5%, so that is no real aspiration.
The slide in US retailing sector - it shed 20,000 jobs in December and 67,000 for the year - was a key factor in the slowing growth last month (December is supposed to be peak employment time for the sector).
But these retail losses were offset by solid gains in healthcare, construction and manufacturing last month, the Labor Department said. For example the healthcare sector created 31,000 jobs last month and 300,000 jobs last year.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.