A Goldilocks Economy is an economy that is neither too hot or cold, in other words, it sustains moderate economic growth and has low inflation, which allows a market-friendly monetary policy.
- Today’s national employment report
from the U.S. Bureau of Labor Statistics once again outpaced expectations by
posting a 263,000 increase in jobs added in April. The strong gain adds to the upward
revisions of the two previous months, bringing the year-to-date monthly average
to 205,000 jobs added, only slightly below the 223,000-monthly average in 2018.
- Notable job gains continue to bolster professional
and business services (up 76,000 jobs), which comprised about one fifth of last
year’s employment growth. Other sectors experiencing notable growth include
construction (up 33,000 jobs), healthcare (up 27,000 jobs), and social
assistance (up 26,000 jobs). Retail trade employment, particularly in general
merchandise stores, are continuing to weaken.
- According to a new CompTIA report, the information-technology sector added 18,900 jobs in April, with hiring in technology services, custom software development and computer systems design leading April job growth. Software and application developers continue to be the most in-demand talent companies are looking to hire, with 78,000 job postings last month.
- The unemployment rate, falling to 3.6 percent,
hit another 50-year low (the lowest rates since 1969). Nevertheless, the
decreased unemployment rate primarily stemmed from a drop in labor force
participation, which has been improving in recent years but was inevitably
going to decline due to demographic factors like retiring baby boomers and lack
of population growth. In addition, immigration of foreign-born workforce has
slowed dramatically. Over the past 10 years, immigration has been a significant
contributor to the domestic labor force, accounting for half of labor force
growth. While labor force participation among women has returned by to
pre-recession rates, male participation rates are still well below. Women’s
participation has been fueled by growth in industries that generally employ a higher
share of women, such as healthcare and education, while men’s participation has
been held back by a decline in manufacturing jobs and factors such as the opioid
crisis and lower graduation rates than women.
- Wage growth has inched up, 0.1 percent, in
line with expectations, but still relatively subdued at this point of the labor
market cycle. A recent surge in productivity is one of the main arguments for
the lack of compensation growth. Overall, labor income is running at about 4
percent annualized growth rate. However, low inflation is helping improve real
wages and will keep bolstering consumer spending.
- Nevertheless, low inflation is the reason the
Federal Open Market Committee (FOMC) decided to keep the fed funds rate
unchanged earlier this week. The FOMC’s decision was largely based on slower
growth in household spending and business fixed investment, and consequently
lack of overall inflation which the FOMC believes will remain muted. While
March’s decision to keep the funds rate unchanged was primarily due to concerns
over lack of global growth, their most recent statement shifted the concern to
low inflation expectations.
- FOMC is expecting to see continued economic
growth through 2019 supported by a rebound in domestic demand, putting GDP around
2.5 percent — a slowdown from 2018, but still above the economy’s potential
rate of growth. And while some market observers, and the president, have been
looking for some policy easing from the Federal Reserve, such as lower rates, the
Fed’s statement suggests continued patience and no changes to the fed fund’s
rate through the remainder of this year, and possibly a good portion of 2020.
- In looking at future job growth, the U.S.
Bureau of Labor Statistics Job Opening Labor Turnover Survey released earlier
this month said there were 7.1 million job openings at the end of February.
While the number of job openings declined from recent highs, the number is
still above levels seen a year ago and since 2000 when the data history began.
Job openings decreased from the month before, mostly in accommodation and food
services (-103,000), real estate and rental and leasing (-72,000), and
transportation, warehousing, and utilities (-66,000). The number of job
openings fell in the Northeast, South, and Midwest regions.
- Filling open positions remains a concern for
companies. According to NABE’s Business Conditions Survey, 52 percent of
respondents reported shortages of skilled labor at their firms—an
increase from 45 percent a year ago.