Job Market Report Paints a Dire Image for the U.S. Economy
The U.S. job market is saying that something bad is heading toward the U.S. economy. It’s important that investors pay close attention to the labor market statistics.
Not too long ago, the Bureau of Labor Statistics (BLS) reported job numbers for the U.S. economy for the month of November. There were several troubling developments.
For the month, 155,000 nonfarm jobs were added to the U.S. economy. This figure is well below the average job creation we saw over the last few years. (Source: “Employment Situation,” Bureau of Labor Statistics, December 7, 2018.)
Looking at year-over-year figures, in November 2017, 216,000 jobs were added to the U.S. economy. Simple math here: year-over-year in November, job creation declined by close to 30%.
Know this: the job numbers from September and October were revised lower. Combined, in those months, the job number was overstated by 12,000.
In September, October, and November, an average of 170,000 jobs were added to the U.S. economy. The average before has been around 200,000 jobs.
More Troubling Developments in the U.S. Job Market
Digging a little deeper into the details…
The number of Americans working part-time because they can’t find full-time work remains staggering. In November, the number stood at 4.8 million, which edged higher from 4.2 million in August.
In times of economic growth, part-time job figures tend to go down (because there are more full-time jobs). They increase as the economy slows down. So, increasing the number of part-time workers is actually bad news.
Beyond this, look at the income figures.
In November 2018, the average hourly earnings for all employees on private nonfarm payrolls increased by $0.06 to $27.35. Over the past year, these wages have increased by 3.1%.
Here’s the thing: the hourly wage figure is not adjusted for inflation, and it’s an average. Between November 2017 and October 2018, prices in the U.S. economy increased by 2.4%. So, in real terms, average wages only increased by 0.7%. (Source: “CPI-All Urban Consumers,” Bureau of Labor Statistics, last accessed December 11, 2018.)
Obviously, these are just rough calculations. With more data, things will become clearer.
Bringing everything together, not too long ago, we were told that the tax cuts by the Donald Trump administration would create more jobs and Americans would get paid more.
We haven’t really seen the effects we were promised. Surely there’s some job growth in the U.S. economy, but wages remain relatively flat.
Why Is The Job Market Worth Watching Closely?
Dear reader, the U.S. labor market could tell us a lot about what’s ahead for the economy.
Understand this: the U.S. economy is highly dependent on consumers. In fact, roughly 70% of the U.S. gross domestic product (GDP) is based on consumption. If consumption declines a little, the U.S. economy gets hurt a lot.
If Americans don’t have jobs and they are not making more money, they can’t spend more. This creates a massive impact on consumer spending, and ultimately on the overall economy.
Going forward, if the job market in the U.S. struggles, it could also be an indicator of how businesses are doing. If jobs don’t grow, it could be a sign that businesses in the U.S. economy are getting nervous and stepping back.