U.S. Job Growth Accelerating

November 1, 2019
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Author: ThinkWhy Analyst

The U.S. Labor Market added 128,000 jobs last month, exceeding economists’ forecasts. The pace of job growth has accelerated over the last three months with an average of 176,000 jobs, as compared to the monthly average year-to-date gain of 167,000 jobs.

The U.S. economy remains steady and the job market remains strong with:

  • Low unemployment rate at 3.6 percent
  • Strong labor force participation at 63.3 percent
  • Strong consumer spending drove GDP growth to 1.9 percent
  • August and September job gains revised up by 95,000
  • Economic stimulation by the Fed's third interest rate cut this year
U.S. Jobs Report for October 2019

ThinkWhy™ It Matters

U.S. businesses, particularly those outside of the automotive industry, can remain cautiously optimistic. With the low unemployment rate and continued job growth, companies are pressured to find the talent they need to grow.

A continued tightening of the labor market requires employers to:

  • Increase investment in process improvement and workflow automation
  • Enhance focus on training and upskilling current employees
  • Offer competitive wages or creative comp packages to recruit top talent
  • Consider hiring from the alternative workforce to fill key roles
  • Hire based on company revenue performance as opposed to recession noise

National Summary

U.S. employers continued to add a healthy volume of workers in October with strong positive revisions in August and September. The GM strike and the exit of temporary Census workers impacted what could have been a stronger employment report.

Monthly Job Gain and Growth

Positives

  • Over the past 12 months, average hourly earnings have increased by 3.0 percent helping to drive up consumer spending.

  • Personal savings rate, as a percent of disposable income, was close to 8.3 percent, up one half a percent in three months.

  • Labor force participation rate held at 63.3 percent in October 2019.

  • The unemployment rate was little changed at 3.6 percent in October 2019.

  • The change in total nonfarm payroll employment for August and September combined was revised up by 95,000 jobs.

  • Consumer spending is robust and should remain strong through the holiday season.

  • Consumer confidence is high and expected to continue.

Negatives

  • Business investment, including commerical real estate, infrastructure and machine buying, decelerated indicating cautious investing.

  • Uncertainty surrounding trade remains a downside risk to the labor market along with global slowdown.

  • Manufacturing employment declined by 36,000 in October 2019, largely due to the GM strike.

Industry Movement

Monthly Job Gain and Growth by Industry

Manufacturing makes up 8.4 percent of total employment. 36,000 manufacturing jobs were lost, largely driven by the GM strike. Expect this to subside in November as 40,000 employees are expected back to work.

Leisure and Hospitality makes up 11.1 percent of total employment. Gain within this industry was a substantial 61,000 jobs. Within this industry, Accommodation and Food Services saw increases of 53,200 jobs sustained by professional sports and mild weather.

Professional and Business Services make up 14.2 percent of total employment. Gain within this industry was 22,000 jobs. Monthly job gains in the industry have averaged 36,222 jobs thus far in 2019, below the average monthly job gain of 50,333 for the same period in 2018. In the past 12 months, this industry has produced more than 402,000 jobs.

Within this industry, employment in Management and Technical Consulting increased by 7,200 jobs.

Education and Health Care Services make up 16.1 percent of total employment. Education and Health Care Service produced approximately 39,000 jobs this month.

Financial Activity makes up 5.7 percent of total employment. In October, employment in financial activities rose by 16,000, with gains in real estate and rental and leasing (+10,000) and in credit intermediation and related activities (+6,000). Financial activities added 108,000 jobs over the last 12 months.

Government jobs decreased by 3,000 as workers begin to complete their tasks for the 2020 Census.

What to Expect

The U.S. should still see moderate job gains for the remainder of 2019, albeit below the 2018 growth rate. The annual pace of job gains in October 2019 was 2.093 million or 1.40 percent.

U.S. Forecasted Annual Job Gain and Growth

The Outlook

  • Long-term job growth is expected to slow meaningfully starting late 2020 and will reach the trough during the 3rd quarter of 2021.

  • Expect Professional Business and Technical Services and Healthcare industries to continue to lead the job gain and growth in the U.S.

  • Mining and Logging and Trade, Transportation and Utilities sectors will continue to struggle to add jobs in the near term.

  • Expect very slight positive gain, but no job loss, with the trough (lowest point) projected in Q3 2021. After that, job gain will occur at an increasing rate, with the magnitude of growth expected to increase during 2022 and continue at a robust trajectory through 2024. After the low in Q3 2021, availability of labor is expected to loosen up along with new workers joining the labor force.

  • Excluding the Great Recession, historically low unemployment rates will force the U.S. economy into a shortage of skilled labor conditions, creating a hurdle to higher nominal job gain despite healthy U.S. economic fundamentals.