Unemployment Rate Forecast

Economic Forecasts

Job Gains Slowing Modestly

Kiplinger’s latest forecast on jobs

iStockphoto

GDP 2019 growth will be 2.3%; 1.8% in 2020 More »
Jobs Job gains of about 170,000 per month in '19 More »
Interest rates 10-year T-notes staying around 2% until trade war ends More »
Inflation 2.3% in ’19, up from 1.9% in ’18 More »
Business spending Up just 2% in ’19 amid uncertainty of trade war More »
Energy Crude trading near $60 per barrel in October More »
Housing 5.35 million existing-home sales, down 1.1% in ’19 More »
Retail sales Growing 4.3% in '19 (excluding gas and autos) More »
Trade deficit Widening 7%-8% in ’19 More »

August job gains of 130,000 were lower than expected, but still consistent with the new normal for the economy. Monthly job growth in 2019 is likely to average 150,000 jobs per month, down from 223,000 in 2018. Partly, that is because there are fewer available workers to hire, given the low unemployment rate. But mostly, the smaller gains are consistent with an economy that is slowing down to a more moderate growth rate. The tax cut stimulus to growth couldn’t last, and the trade war with China is keeping export and commodities-oriented industries from expanding.

The positive takeaways from the report: Wage growth for nonsupervisory workers ticked up to 3.5%, and the number of hours worked rose. The share of the population employed is the highest since 2008. There were a few weak spots as well: Retail shed workers for the seventh straight month as stores continue to close. The telecom sector also continued its long decline. The drop in oil prices has led to job cuts in the oil and gas sector. Trucking experienced a surprise cutback. Machinery and metals production is being hurt by the global economic slowdown.

The labor market is still tight, with a low unemployment rate of 3.7%. This is just a tick above the lowest rate in 50 years. Job openings continue to exceed new hires. The short-term unemployment rate (those unemployed for less than six months) is near its lowest level since the Korean War in 1953.

Slower job growth is likely to allow the Federal Reserve to cut rates again this fall, after first cutting them on July 31. A softer jobs market gives the Fed some maneuvering room to cut without stoking inflationary pressures, since rapid job gains tend to lead to faster wage increases that push up other prices. We expect the Fed to cut rates by a quarter of a point at its policy meetings on September 18 and October 31.