The number of jobs created in the U.S. is likely to rebound in January after a disappointing finish in 2017, but even it doesn’t, expect the economy to keep on truckin.’
About 171,000 jobs were probably created in the first month of the new year, according to the MarketWatch forecast.
Some economists think the number could easily top 200,000, but a severe cold snap early in the month might have put a brief freeze on hiring in industries such as construction.
Figuring out how many new jobs are created before and after the wintry holiday season isn’t easy, especially amid a huge shift toward Internet shopping. Jobs are disappearing in older industries such as brick-and-mortar retail and moving to e-tailers such as Amazon and shipping firms such as Fedex and UPS.
Government bean-counters have had a hard time adjusting the employment numbers for season variations given the metamorphosing U.S. economy — and that may partly explain the modest 148,000 increase in jobs in December. The “missing” jobs, if there are any, could show up in January.
Whatever the case, the U.S. economy rests on a deep sheet of bedrock.
Job openings are at record highs. Unemployment is at a 17-year low. Loans are cheap. Businesses are increasing investment. And stock markets keep setting new peaks and enriching households.
That’s not all. President Trump recently signed the biggest corporate tax cut since 1986, a law that’s also expected deliver lower income taxes to about 90% of households.
What’s more, the falling value of the U.S. dollar means American goods are even cheaper to buy.
“From an economic perspective, the sagging U.S. dollar simply pours more gasoline on an already raging bonfire of financial and fiscal stimulus,” argues Douglas Porter, chief economist of BMO Capital Markets.
“The question, of course, is whether this is what the U.S. economy needs at this advanced stage of the cycle? That’s like asking ‘Do the New England Patriots need better coaching?’ Porter said. “Uh, no.”
The U.S. economy, alas, is not quite performing at a Super Bowl level.
Gross domestic product, for example, grew a solid but unspectacular 2.3% in 2017. While that’s pretty good, the modern U.S. economy has historically expanded at a 3.2% pace.
More to the point, the U.S. has failed to hit the 3% annual mark in every year since 2005, reflecting the weakest expansion in the Post World War Two era.
It would be unreasonable, however, to write off the current expansion as a grave disappointment. The economic upturn will mark its ninth birthday in the early summer, and it’s on track to set an all-time record within two years.
What’s are the biggest hurdles? Probably the threat of higher inflation and interest rates. If inflation accelerates and blows past the Federal Reserve’s 2% target, the central bank would have to jack up rates and thus raise the cost of borrowing.
The Fed’s preferred inflation gauge, the PCE index, is likely to show a sizable increase in December, but the 12-month rate will probably remain below 2%.
The Fed itself will have something to say about inflation in its statement next week. Analysts are expecting a minor tweak in the statement to set up an interest-rate hike in March.
