January 15th, 2018
Originally posted by: USNews
The U.S. economy drummed up another solid month of job creation in November, as employers across the country generated 190,000 new jobs, according to the latest ADP National Employment Report.
November’s job total dipped slightly from October’s 235,000, though that was to be expected with October considered an overcorrection after hurricanes walloped the southern U.S. in August and September.
“Hard to find any problems in the job market,” Mark Zandi, chief economist at Moody’s Analytics, told reporters during a conference call on Wednesday. “Let’s enjoy it. The numbers are good. The job market is rip-roaring.”
Service-providing outfits tacked on 155,000 additions last month, with 31,000 gains going to health care and social assistance professions and another 47,000 to professional and business services.
Goods producers, meanwhile, accounted for 36,000 gains on net. The manufacturing industry actually managed 40,000 additions, but those gains were offset by a loss of 4,000 construction jobs and a stagnant natural resources and mining sector.
“The only soft spot was construction, but that is probably just some volatility related to the effects of the hurricanes.,” Zandi said. “Manufacturing was very robust. It has been a solid contributor to job growth now for the past almost 18 months. That goes to good activity in the vehicle industry. … It also goes to trade – global trade in the global economy.”
Per ADP’s data, employers have generated at least 190,000 new jobs in 10 of the past 12 months. With an underlying rate of monthly job growth in the 175,000 to 200,000 range, Zandi noted the economy is “roughly doubl[ing] the rate of job growth necessary to absorb the growth in the labor force.”
What that means going forward, Zandi said, is likely a lower unemployment rate, higher wages and the increased likelihood that individuals currently sitting on the sidelines of the labor market will jump into the fray.
What it also means, however, is that the labor market runs the risk of getting ahead of itself – possibly threatening what is now the economy’s eighth year of economic expansion.
“The one big change that will have implications for the labor market going forward … is now the prospect for tax legislation to become law,” Zandi said. “The prospects of an overheating labor market are now rising. We’re definitely not there yet. It’s premature to say that. But it is a growing risk as we move into next year.”
House Ways and Means Committee Chairman Kevin Brady, R-Texas, begins the markup process of the GOP’s far-reaching tax overhaul as members propose amendments and changes to shape the first major revamp of the tax system in three decades, on Capitol Hill in Washington, Monday, Nov. 6, 2017. (AP Photo/J. Scott Applewhite)
Repeal Zandi couched his warning by predicting the labor market would get “very strong” in the aftermath of the bill’s passage – which to this point is considered likely as lawmakers head to conference to work out differences between companion pieces of legislation in the House and Senate.
But he warned that the Federal Reserve may be forced into raising interest rates more quickly to keep up with the effects of the tax bill. Four rate hikes next year wouldn’t be outside the realm of possibility if this bill goes through, Zandi said.
What all of that means could ultimately be good for the economy, but Zandi noted the risks of an overheating environment in the U.S. could start to rise. Ten of the most recent recessions dating back to the 1940s, he said, “have been preceded by an economy that’s overheated.”
In the near term, Zandi had nothing but positive things to say about a labor market that appears to be chugging along comfortably heading into 2018. But the longer-term implications of the country’s progress and the introduction of fiscally stimulative legislation like a tax overhaul raises the possibility that things start to unravel going forward.