US: Employment situation and economic climate bode well for 2019

The most recent labour market report from the United States was thin on surprises, even though the number of new jobs added fell slightly short of market expectations. Ultimately, it was another building block in what looks to be a very positive year. This and the strong trend barometers suggest that new jobs will continue to be added next year too, although the impetus is expected to be a little weaker. Private consumption will therefore probably ease only slightly and continue to be a key driver of the economy in 2019 as well.

According to the November report, 155,000 new jobs were created and the unemployment rate remained unchanged at 3.7%. This historically low rate has remained steady for the third consecutive month already. The year ahead is by now looking to be very successful, not only for the US labour market but for the economy as a whole. This is implied by the real economic indicators to hand for the fourth quarter and by the repeated improvement in the trend barometers for the industry, and among the service providers. Economic growth averaged at just below 3% for the year and more than 2.3 million new jobs were added in total. This compares with only 2.2% economic growth and employment growth of just short of 2.2 million in 2017.

The manufacturing sector provided added impetus to the employment situation last year. 2018 is expected to be remembered as a particularly good year for US industry. While total non-farm payroll employment rose by more than 1.6% over the previous year, the increase in the manufacturing industry was somewhat above 2%. The US last recorded a higher growth rate in the mid-80s. We see no turning point on the horizon for now. The future-oriented industries and therefore the future-proof jobs can be found in the services industry. The latest development at car manufacturer General Motors is not the only issue to highlight the burdens posed by the fiercely contested international goods markets. Last year was ultimately a positive exception and will not be repeated as such.

Even so, the total number of US workers will climb to 150 million in December and therefore set a new milestone for the US economy. The fact that this development was possible, despite the US Federal Reserve’s tight monetary tightening course, is probably also due in part to the government’s expansionary fiscal policy. The marked cut in corporate tax prompted many companies to invest in plant and machinery. This momentum is expected to last well into next year, as signalled by the good order situation and the most recent ISM sentiment indicators. Nonetheless, economic growth will slow down in 2019 to just over 2.5%. The unemployment rate will continue to decline at the same time and wage growth will be higher.


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