E Because The U.S. Job Market Is So Tight, Job Creation Will Likely Moderate This Year

The U.S. economy has now recorded two consecutive years of unusually strong job creation. As of December 2017, payroll employment in the U.S. expanded by 2.1 million over the year compared with a gain of 2.2 million jobs in 2016. Incorporating recent revisions to the data, job growth has averaged 204,000 per month over the past 3 months.

Although payroll employment growth slowed towards the end of 2017 (252,000 new jobs in November and 148,000 in December), for the third straight month the unemployment rate remained at its record low of 4.1% in December. Indeed, the national unemployment rate declined by 0.6 percentage point over the past twelve months. manufacturing added jobs.

Other indicators of year-end strength that emerged in the December figures include:

A continued drop in long-term unemployed as a percent of total unemployed. For example, individuals unemployed for 27 weeks or more accounted for 22.9% of total unemployment in December versus 23.8% in November.

Another barometer of the job market is the U6 unemployment rate, which accounts for both unemployed and underemployed workers. The U6 unemployment rate was 8.1% in December versus 8.0% in November.

As well, in December average hourly earnings rose 0.3%, though, over the year, the earnings increase was 2.5%.

In conclusion, one would think that given these strong job creation indicators, employers should be having more difficulty in finding new employees, particularly those with the appropriate skill set. Looking ahead, it will be hard to add new jobs when the pool of workers looking for work is shrinking.