Job Market's Decade-End Bang Risks Fizzling in Less-Roaring '20s
Job Market's Decade-End Bang Risks Fizzling in Less-Roaring '20s
(Bloomberg) -- The 2010s are ending with unexpected strength in the U.S. job market, but there’s reason to doubt there will be another roaring ’20s.
November’s 266,000 payroll gain, the biggest since January, exceeded forecasts and job growth in the prior two months was revised higher -- calming concern about a slowdown in the economy or even potential recession.
But broader issues remain, from the trade war with China and slowing global growth to weakness in manufacturing. And there are fewer people left to hire after a decade of strong job gains.
That means it’s an open question if President Donald Trump will be able to count on such strong numbers when voters head to the polls next November. While stocks surged on Friday and headed toward a fresh record following the data, bond markets signaled that investors expect little in the way of a rebound in economic growth, with 10-year Treasuries yielding 1.84% -- down from almost 3% a year ago.
“This report makes a believer out of me, at least for another few months,” said Josh Wright, chief economist at recruiting-software provider iCIMS. “The labor market is going to slow and the question here is about when and how quickly. There is going to be a drag on the economy overall from the slowdown in manufacturing -- there are also only so many workers out there.”
For now, the strength is enduring better than most economists expected at this point in the expansion, which at more than 10 years is the country’s longest on record.
The shrinkage in the pool of available labor -- now the smallest since at least the early 1990s -- along with unemployment matching a half-century low, are giving wages more of a boost.
Earnings for production and non-supervisory workers, which account for about 80% of the labor force, rose 3.7% in November from a year earlier, following a 3.8% gain the prior month that was the fastest since 2008.
What Bloomberg’s Economists Say
“Bloomberg Economics is lowering its projection of the 2020 year-end unemployment rate to 3.3% from 3.4%. Hiring momentum continues to surpass the growth rate of the labor force, which is closer to 100,000-125,000 per month. On Nov. 3, 2020, as voters head to the polls, they will be facing the lowest election day unemployment rate since Dwight Eisenhower won his first term as president in 1952.”
-- Carl Riccadonna and Yelena Shulyatyeva
To see the full note, click here.
In addition, hiring in recent months was solid across most industries, including sectors like retail and leisure -- suggesting Americans feel confident enough to use earnings on discretionary spending.
The four-month gain in the overall leisure category was the highest since January, along with a subcategory measuring hiring in lodging and restaurants.
Trade Tensions
But manufacturing, which saw the return of about 40,000 striking General Motors Co. workers in November, still faces major challenges in the U.S. and around the world. A lot could depend on whether Trump resolves the trade war with China and business investment rebounds.
White House economic adviser Larry Kudlow said Friday that the two sides are in “almost around-the-clock” negotiations on some of the most “delicate” matters in a potential first-phase deal, including a dollar amount of commodity purchases.
“2020 is fraught with uncertainties,” and it’s unlikely the U.S. economy will maintain current momentum next year, Mark Cabana, head of U.S. interest-rates strategy at Bank of America Corp., said on Bloomberg Television.
Economists surveyed before Friday’s figures were forecasting growth in gross domestic product of 2.1% in the fourth quarter on a year-over-year basis, slowing to 1.7% at the end of 2020.
Drew Matus, chief market strategist at MetLife Investment Management, said that while the November jobs report was one of the best he’s seen, downside risk remains.
“Next year we’re going to see some growth slowing in the U.S.,” he said. “Uncertainty is the key holding people back. But until that uncertainty translates into job losses -- not just slower job gains, it’s hard to see how growth could slow materially.”
(Michael Bloomberg is seeking the Democratic presidential nomination. Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.)
To contact the reporter on this story: Katia Dmitrieva in Washington at edmitrieva1@bloomberg.net
To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Margaret Collins
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