The U.S. economy is finishing the year in stronger shape, in part because of resilient consumers and a healthy job market.
With near-record low unemployment and solid wage growth, the U.S. labor market is expected to continue to underpin consumer spending and the economy.
“The economy is still solid,” said Diane Swonk, chief economist at Grant Thornton. “What this economy has lacked in momentum, it has made up for in stamina, and the Fed gave it a shot of adrenaline this year with three rate cuts.”
“The labor market remains strong and that economic activity has been rising at a moderate rate,” the committee said. “Job gains have been solid, on average, in recent months, and the unemployment rate has remained low.”
The Federal Reserve is conducting a review of its monetary policy tools, due for completion next year.
Employment Figures
The latest employment figures, released Dec. 6, show that nonfarm payroll employment rose by 266,000 in November, and the unemployment rate stood at 3.5 percent.By comparison, joblessness among the cohort of 16- to 19-year-olds ticked down to 12 percent in November, compared to 12.9 percent in January. Peak unemployment for this group in the past two decades hit 27.2 percent in October 2009.
Joblessness among blacks or African Americans reached historic lows in 2019, falling to 5.5 percent in November from 6.8 percent in January.
Strong Consumer Spending
A Labor Department report showed that consumer spending grew by a solid 0.4 percent rate in November, the strongest gain since July, and incomes rebounded after a weak reading in October.The brisk pace of spending in November is a reassuring sign that consumers, who account for about 70 percent of economic activity, are helping buoy the economy amid international trade tensions.
Many economists are forecasting that the U.S. economy is expanding at a respectable 2 percent annual rate in the final quarter of the year.
Unemployment Claims Drop
The number of Americans filing applications for unemployment benefits dropped last week by 18,000 to a seasonally adjusted 234,000 for the week ended Dec. 14, the Labor Department said.The surge in the week ended Dec. 7, which boosted claims to 252,000—the highest reading since September 2017—probably reflected a late Thanksgiving Day this year, compared to 2018. That may have thrown off the model used by the government to strip out seasonal fluctuations from the data.
Employment Projections
The U.S. Bureau of Labor Statistics (BLS) expects employment to grow by 8.4 million jobs to 169.4 million over the 2018–2028 decade.The BLS said five sectors are projected to experience employment declines from 2018 to 2028: retail trade, wholesale trade, utilities, federal government, and manufacturing
The agency estimates that retail trade will decline by 0.1 percent per year, driven in part by a shift to e-commerce. The trend is projected to cause 153,700 retail jobs to disappear.
Workers aged 65 years and older are increasingly staying in the workforce, the BLS said.
“The labor force participation rate for these workers is expected to increase to 23.3 percent by 2028,” the agency noted.
The trend is much the same for workers ages 55 and older, a group that includes baby boomers. The labor participation rate for this cohort is projected to continue to increase over the 2018–2028 decade to 25.2 percent, from 23.1 percent, the BLS said.
The agency said that it expects real GDP to grow at 1.8 percent from 2018 to 2028, much the same rate as it did in the previous decade.
Labor productivity is expected to accelerate slightly from the previous decade to an annual rate of 1.6 percent. Growth in productivity in the previous decade stood at 1.3 percent per annum.
The BLS expects the overall labor force to grow at an annual rate of 0.5 percent from 2018 to 2028, which represents an increase of 8.9 million over the decade to 171 million by 2028. At the same time, the labor force participation rate is projected to decline to 61.2 percent, driven mostly by a decrease in the participation rate for men, to 66.1 percent from 69.1 percent.