Unemployment Rate Forecast

Economic Forecasts

Job Market Surge Not Likely to Last

Kiplinger’s latest forecast on jobs

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GDP 2.6% growth in '19 More »
Jobs Job gains of about 175,000 per month in '19 More »
Interest rates 10-year T-notes at 2.8% by end ’19 More »
Inflation 2.0% in ’19, up from 1.9% in ’18 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 »

The June job market rebound is unlikely to be replicated. Employment jumped 224,000 in June, but that was partly a make-up after May’s paltry 72,000 new jobs. Growth in 2019 is likely to average 175,000 jobs per month, down from 223,000 in 2018. The worker shortage is likely responsible. However, there is evidence of lower demand in a few sectors, such as retail, which has shed workers for the fifth straight month. Closings of clothing and department stores account for most of the retail job loss.

The labor market is still tight. Despite an uptick in the unemployment rate to 3.7% in June, it is still nearly the lowest 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 end of the Korean War in 1953.

Nonsupervisory workers’ paychecks rose at an annual rate of 3.4% in June. Scarcity in the labor market has boosted pay growth, though rate increases appear to be stuck at 3.5%.

The jobs surge is unlikely to deter the Federal Reserve from cutting interest rates later this year. Given the manufacturing slowdown caused by the trade war, we expect Fed Chairman Jerome Powell will want to offer a rate cut as “insurance” sometime this year. The central bank was reluctant to cut rates while the labor market was extremely tight, for fear of overheating the economy. Lack of wage growth acceleration gives the Fed some maneuvering room without stoking inflationary pressures.