Movers and SHAKERS
Will the Longest Economic Expansion in History Continue?
Job growth in the United States slowed more than expected in August. The U.S. labor market has been a key positive player amid weakening global economic data, but the most recent report is shaky. The Federal Reserve is expected to cut interest rates again this month to keep the expansion on track.
Wage Gains. Although job growth slowed more than anticipated, strong wage gains were seen across the board. The increase in wages cushioned the impact and should support consumer spending to keep the economy expanding. Average hourly earnings, often used as an inflation indicator, rose more than expected between August and July, with a 0.4% increase, which brings wages up to 3.2% this year. The U.S. unemployment rate held steady at 3.7%, but a decrease in job growth could impact a large number of companies, as consumers become more cautious with their spending. Small businesses are normally impacted first as a slow profit stream without fallback capital makes repaying creditors difficult.Manufacturing Bounces Back. Resulting from the ongoing trade tensions, manufacturers slashed workers’ hours last month. The Labor Department’s monthly employment report showed a rebound as their hours climbed back up. Growth in manufacturing has averaged 6,000 jobs per month this year, compared with 22,000 in 2018, but the workweek rose 0.2 hours to 40.6 hours in August. Average hourly earnings also saw gains of 0.4% last month, which is the largest increase since February.
Sign of Slowing Global Development. Slowing job growth is constant with current economic conditions. The continued trade war has caused uncertainty to spread across the market, eventually affecting almost every aspect. The wage increases were not enough to lead to high inflation, which is what the market currently needs. The recent job report almost inverted the yield curve again, with the 2-year yield at 1.53% and the 10-year only at 1.56%. The possibility of an economic contraction is always looming, but the Federal Reserve plans on “acting as appropriate” to ensure we keep expanding.
More Job Cuts to Come. Job gains have averaged 156,000 over the last three months, which is still above the 100,000 needed to keep up with the growing working population, but more cuts may be on the way. According to a global outplacement firm, Challenger, Gray & Christmas, planned job cuts in the U.S. have risen 37.7%.
Keep on Keeping on. We are currently in the 11th year of the longest economic expansion in history. There is something to say about such an accomplishment, but it may be finally starting to take a turn. Slowing job growth could be an indicator of a recession, but wage increases were able to help counteract the effects. There have been a few inverted yield curves this year, but it is now slightly reverted and economists are optimistic.
https://www.reuters.com/article/us-usa-economy/u-s-job-growth-slows-further-wages-hours-pick-up-idUSKCN1VR0BD, Lucia Mutikani, September 6, 2019