It’s official: We’re now living in America’s longest-ever economic expansion on record. But the rapid job growth of the past two years seems to be cooling off.
Economists polled by Refinitiv estimate that Friday’s employment report from the Labor Department will show that the nation added 160,000 jobs in June, while remaining at a historically low 3.6% unemployment rate.
That would be a bounce back from the disappointing 75,000 jobs in May, but a slowdown from the 196,000-per-month average over the past year. So far in 2019, the economy has added a monthly average of 164,000 jobs, down from 230,000 over the same period last year.
“The slowdown that we are experiencing is significant and the economy is very close to what I would call stall-out speed, where unemployment is rising,” said Moody’s Analytics chief economist Mark Zandi. “This is the first time really in almost a decade where we are starting to see a material, significant slowing in job creation.”
Zandi was discussing the June report from payroll processor ADP, an imperfect proxy for the Bureau of Labor Statistics’ survey, which showed particular weakness in construction and retail jobs. Construction employment has been a victim of the lackluster housing market, with housing starts flatlining last year after a rise in mortgage interest rates. Rates have since subsided, but construction hasn’t significantly picked up.
Brick and mortar retail has suffered thousands of layoffs from big-box bankruptcies as e-commerce continues to grow market share — the sector has 160,000 fewer jobs than it did at its peak in January 2017. Although e-commerce has driven gains in the transportation and warehousing sector, it’s unlikely that they’ve fully offset the retail losses, given the quick march of automation in packing and shipping goods from facilities like Amazon’s fulfillment centers.
“Warehousing and distribution are areas where there’s a greater capacity for productivity growth,” said David Berson, chief economist with the insurance company Nationwide. “People don’t like to interact with robots when they’re buying clothes at a store.”
One wild card is hiring of temporary workers for the 2020 Census, which usually starts ramping up about a year ahead of time, but has yet to show up.
Readings of business sentiment have been very weak. Both manufacturing and services purchasing managers indexes — which measure whether businesses plan to grow or shrink in the near future — have dropped to two and even three-year lows. The manufacturing sector in particular has been caught up in a global trade slowdown that threatens to worsen if the United States and China don’t reach a trade deal soon.
Consumer confidence remains at a high level but has mostly halted its steady rise, and would likely take a turn for the worse if the unemployment rate began ticking up. Although the job openings rate remains just off its peak, in June the Conference Board’s measure showed a sharp increase in the percentage of respondents indicating that jobs are “hard to get,” which tends to be a predictor of a rise in joblessness.
However, workers at least probably haven’t seen the end of fattening paychecks. Refinitiv’s economist poll suggests that average hourly earnings bumped up 3.2% from last year, which would make June the ninth consecutive month with wage growth above 3%.
“Normally, as employment growth slows late in a cycle, we still get accelerating wage gains,” Berson said. “If job growth slows, then acceleration in wages may not be all that rapid, but they’re still likely to move higher.”