WASHINGTON — Dec 7, 2018, 4:28 PM ET

US hiring pullback could signal mild slowdown in growth

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U.S. job growth declined modestly in November, a move that could signal a slower but still steady pace of hiring and growth next year.

The potential for a more anemic economy contributed to a sharp drop in the stock market Friday, sending the Dow Jones average down 560 points, or 2.2%, by market close.

Yet most economists said last month's job gain of 155,000 is more sustainable than some of the larger increases posted earlier this year. And hiring at last month's pace would make it easier for the Federal Reserve to slow its interest rate increases, which investors worry are weighing on the economy.

"This is the new Goldilocks," said Josh Wright, chief economist at iCIMS, a recruiting software company. "Still strong-enough job growth, but a more cautious Fed."

The unemployment rate stayed at 3.7 percent, a nearly five-decade low, for the third straight month, the Labor Department said Friday in its monthly jobs report.

Still, the panicky financial markets illustrate how the views of Wall Street and most of the rest of the U.S. can differ.

For most Americans, jobs and incomes are the most important economic measures. Average hourly earnings increased 3.1% in November from a year earlier, Friday's report said, only the second time they have climbed that much since the recession ended nine years ago.

That's boosting consumer confidence to nearly 18-year highs, spurring more spending, and bolstering winter holiday shopping. Americans lifted their spending in October by the most in seven months.

"We're still a little surprised to see such a growing panic in markets develop quite so soon given the relatively benign economic backdrop," Paul Ashworh, an economist at Capital Economics, said in a research note.

Yet for Wall Street, higher pay can crimp corporate profit margins. Many large, publicly-traded companies are hit by slower growth in places such as Europe and Japan. They are also more directly affected by tariffs that the Trump administration has imposed on a range of imports.

"There is a disconnect between the gloom and doom environment in financial markets and real economic conditions," said Gad Levanon, chief economist at the Conference Board, a research group.

Most analysts do expect economic growth to decelerate next year. The boost from the Trump administration's tax cuts, implemented late last year, is expected to fade. The Fed's rate hikes could send borrowing costs higher. And the Trump administration has imposed tariffs on almost half of all imports from China, which will remain in place during a 90-day window for negotiations announced last weekend.

Those concerns have roiled financial markets, sending major stock indexes down more than 4% this week. That's the worst weekly decline since March.

Growth is forecast to slow to a still-solid 2% to 2.5% percent, analysts say, down from roughly 3% this year. Hiring will likely decline to about 150,000 a month from just above 200,000 this year, through November.

"The economy continues to churn out new jobs and reflects the strong underlying business conditions that point to steady, albeit slower job growth and economic activity in 2019," said Joe Brusuelas, chief economist at consulting firm RSM.

Fed policymakers are still likely to raise short-term interest rates at its meeting later this month, Brusuelas said. But Friday's report suggests the Fed may not hike rates next year as rapidly as many investors have feared.

The ongoing job gains are pushing down unemployment rates to historically low levels for a variety of groups. The unemployment rate for men aged 20 and above fell last month to 3.3%, the lowest in 18 years. And the rate for Americans with just high school diplomas dropped to 3.5%, the lowest since December 2000. The African-American jobless rate declined to 5.9%, matching May's figure as the lowest on record.

That's making it more challenging for businesses to find the workers they need. Employers have posted 7 million open jobs, outnumbering the ranks of the unemployed, which fell last month to just under 6 million.

Michael Mabry, chief operating officer at Mooyah, a fast-causal burger chain mostly located in the South, says his company has had to raise pay and offer more flexible scheduling to attract new workers. The company plans to open 15 locations next year, which could create up to 450 new jobs.

Applications have fallen "to an all-time low," Mabry said.

"We've had to get competitive on work-life balance," Mabry said.

Nearly all employees make at least $10 an hour, and management salaries have risen 5 to 10 percent in the past year, he added.

Nationwide, hiring in November was led by health care firms, which added 40,100 jobs, and manufacturing companies, which hired 27,000 new workers, the most in seven months and a sign that trade tensions have yet to weaken factory hiring. 

Strong holiday shopping helped lift retailer hiring by 18,200 in November, the most in six months. Online spending likely boosted shipping and warehousing jobs, which grew 25,400, the largest in 14 months.

Construction firms added just 5,000 jobs, the fewest in eight months. A weakening housing market, held back by higher mortgage rates, contributed to that decline. New home building fell 2.6 percent in October from a year earlier.

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  • Save America from Ourselves

    By the numbers:

    Unemployment
    * Obama 5.7 to 4.7 (last 23 months), 7.3 to 4.7 (8 year term), as high as 10.0% at peak of recession.
    * tRump 4.7 to 3.7 (23 months)

    Jobs creation (in thousands):
    * Obama 4,896 (last 23 months)
    * tRump 4,407 (first 23 months)

    So what has tRump done that is so genius regarding jobs and unemployment?

  • David Meyer

    Interesting that the lamestream keeps reporting wage growth in absolute, not real, terms.
    When adjusted for inflation that 3.1% reported wage increase is only about 0.7% in real purchasing power terms.

  • Bobo McStevens

    But I don't understand.

    These corporations got a YUUUUGGE tax cut that the shrinking middle class will end up paying for.

    The promise he made was that they would hire more employees!!!!!

  • Jan515

    Wages going up 3.1% over the last 12 months, unemployment at 3.7% which means we are now near full employment, and the consumer confident rate at its highest level in 18 years. Black, Hispanic and women employment at their highest levels, some highest ever. And once the Trump administration works out a deal with China you will see the stock market next spring take off to new all time highs. Life is good.

  • Sir Real

    I am predicting that the economy will downshift in 2019, and that economic growth will continue to slow in 2020, and that Trump will blame it on the Democrats.

  • catmom

    So....... Now we are out of Obama's economy and are seeing the impact of trump being president.

  • Rob Ford

    Oh brother, some fools want the economy to tank, for the country to go bankrupt, for people walking the streets with"please feed me" signs around their necks, just because they hate Trump. What incredibly small minds.

  • Sir Real

    Because of his $1.3 trillion spending bill (aka "magic wand"), Trump was able to brag about the economy this year, but he will not have anything to brag about for the next two years.

  • Rob Ford

    Best economy in 50 years. Not bad,,,and how do you hire more people when there is full employment?

    Wages should be going up faster though, otherwise, not really much to complain about.

  • HadEnoughYet

    Maybe Trump can send every American a shirt that reads: "A trillion more in debt, in exchange for corporate and rich tax cuts, and all I got was this t-shirt"

  • Not_easy_being_green

    So much for the Trump stimulus plan.

  • JLP-B

    It is not a good sign. Trump can not take this as his win. Santa Claus is the good guy. Every year at this time, merchants add hundreds of jobs to facilitate the Christmas shopping rush

  • notagain

    Several major stores and medical facilities either closing or laying off in my area losing over 1k jobs by the end of the year. Very few hiring, except for temp holiday jobs. How is this a good sign in a high traffic, high end area?

  • Disqus 30

    The economy is doing well given most of the indicators are up (positive direction). That’s good.

  • Bob Crabbs

    Just a thought I've been having lately. These jobs that are added are not broken down by full-time and part-time workers. I'm having trouble finding statistics to give me this breakdown. The Bureau of Labor Statistics does not specify if people in the work-force who work two part-time jobs are counted as two seperate people. If anyone can bring me up-to-speed on this I would appreciate it. It would affect the unemployment rate if they are counted that way. Either way, this report is good news. Thanks in advance.

  • CrashinAtoms

    Let's not forget that we let in about 100,000 legal immigrants every month. If they intend to work you can always subtract that number from job growth. If they don't intend to work they will either be dependents, be on welfare or be criminals. Either way they are cutting into our action.

  • pete mancini

    They don't address extra holiday workers.

  • Summer Tyme

    Trumps trade deficit continues to grow worse, with both rising Imports and declining exports.

    Wonder why?

  • Summer Tyme

    "95 million are out of work!
    Worst labor participation rate since Carter!"

    The above are direct quotes from Donald Trump from 2016.

    The 1st statement is misleading.

    The 2nd is irrelevant.

    For the record the labor participation rate today is exactly what it was 2 years ago when Trump took office.

    And there are now nearly 96 million 16 or older who are not in the workforce because there are more retirees.

    As with NAFTA the con man creates non existent problems and then pretends to solve them.

    In this case he simply stops repeating a lie that is no longer useful to him.

  • jake

    A wise person would pay down the debt while the economy is "booming." Instead, our deficit is soaring while the government spends more while generating less revenue. Maybe Trump doesn't care if his grand kids have to pay 10 or 20 or 30 years from now for his excesses today.

  • Flipper 6666

    Here in Florida the rate is down to 3.4%. Thanks Gov. Scott.

  • LucanTheMan

    So the unemployment rate is at a consistent low for three months, that is lower than it's been in five decades - and wages went up 3 percent - but the headline is that hiring slowed? Figures. Wouldn't want to appear positive.