US jobs engine keeps defying forecasts for 2017 slowdown

Bloomberg

In an economy growing at a moderate pace at best, the US job market keeps on shining.
Payroll gains topped forecasts in five of the past seven months, putting the 2017 average increase of 184,000 almost on par with last year’s 187,000 and above levels typical for the eight-year expansion. Analysts expect barely any falloff from that pace in August figures due Friday, amounting to job growth about double what’s needed to keep the unemployment rate steady in the longer run.
Sustained demand for workers—highlighted by record vacancies—is pushing down unemployment and even attracting Americans who weren’t actively looking for a job.
What’s more, the strong run of hiring challenges a widespread assumption in forecasts late last year: that the economy would run low on workers as it approached so-called full employment, causing payrolls to downshift.
A confluence of reasons helps explain the outperformance, including steady consumer spending; bullish business sentiment on hopes President Donald Trump will cut taxes and boost growth; stabilisation in oil prices; and improving export markets. Moreover, weak wage gains suggest employers are adding workers instead of investing in technology, something reflected in sluggish productivity. Recent hiring has been driven by low-paying industries such as restaurants, home health-care services and leisure.
“There is enough supply of labor to keep hiring growing at a fairly robust pace,” said Michael Gapen, Barclays Plc’s chief US economist. There’s also still plenty of demand for workers in this “slow but super-durable expansion,” he said.
Employment probably rose by 180,000 this month after 209,000 in July, according to the median estimate in a Bloomberg survey. One caveat: August employment tends to come in below expectations due to difficulty adjusting data for the new school year. In the initial report, August hiring missed expectations each of the past six years, only to be revised upward in five of those.
The Bloomberg survey projects the August jobless rate held at a 16-year low of 4.3 percent. The data also won’t show any fallout from Harvey, as the Labor Department’s payrolls survey week— which includes the 12th of a given month—closed before the hurricane hit Houston on August 25.
Gapen expects monthly job gains of about 175,000 through next year, pointing out that in the past few expansions, the unemployment rate kept declining while payrolls remained healthy until the economy began slipping into a recession.