The US economy continues to grow slowly but there are growing signs that conditions are weaker than many forecasters believe.
While GDP is growing at around 2% and Wall Street continues to hit a series of new highs (led by the likes of Apple) more and more analysts are wondering if the about to start December quarter earnings season will turn out to be weaker than expected.
The weakest part of the economy for much of 2019 was business investment which slowed noticeably as the year went. Growth was held up by solid household spending, but now that’s under question in the wake of the December jobs report.
The report confirmed that new job numbers have slowed noticeably while wage growth has cooled sharply.
As well, 2019 saw the smallest number of new jobs created in four years.
The US Labor Department reported last week that the economy added fewer jobs than expected in the final month of 2019, while wage growth dropped below 3% for the first time since July 2018.
The US added 145,000 jobs in December, below market estimates of 160,000. The unemployment rate was steady at a 50-year low of 3.5%.
December’s new jobs figure was considerably lower than November’s 227,000 jobs (revised down by 10,000). October’s figure was cut by 4,000.
In the 12 months through December, wages rose 2.9% after gaining 3.1% in November. That was sharply lower than the multi-year peak of 3.4% in the year to last February.
Notably, the struggling manufacturing sector lost 12,000 positions in December. But retail and health care added 69,000 jobs between them in December.
The average monthly gains for the last three months of 2019 were 184,000, on par with the rest of the year.
For all of 2019, the US economy added 2.1 million jobs. That was the smallest annual gain in four years – 2.6 million were created in 2018, 2.2 million in 2017 and 2.3 million in 2016.
So with wages growth cooling and the jobs boom losing steam, will 2020 see the US economy move post-boom as household spending slows?
The US December earnings season starts this week with a number of major banks reporting, including JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, US Bancorp.
Blackrock and Amex also due to release results, as are airline major, Delta, and rail giant, CSX. Oil services group Schlumberger is also due to release.
But the major release will be from Netflix late in the week. Its subscription numbers inside the US will close closely watched to see if there is more weakness in the numbers that were seen in late 2019.
International figures will be broken down as well and will help provide more details on growth at the start of what will be the best test year for the streaming giant.