by Bill McBride on 12/07/2016 03:00:00 PM
Wednesday, December 07, 2016
I'm starting to look at my 10 economic questions for 2017 (something I do every year).
Last year I thought the unemployment rate would be 4.5% in December 2016 (the rate fell to 4.6% in November), and that the economy would add around 200,000 jobs per month (down from 2014 and 2015). Through November, the economy has averaged 180,000 per month in 2016.
I'll be looking at several factors for job gains in 2017 - demographics, labor force participation economic growth, fiscal policies, etc. - but my general view is the economy is solid, has room to run, however it is past the peak of the employment gains for this business cycle. It appears the peak job gains in this cycle was in 2014.
Click on graph for larger image.
This graph shows the annual job gains for both private and public employment.
In the '80s, annual private employment gains peaked at 3.6 million in 1984, however the employment expansion continued for five more years.
In the '90s, private employment gains peaked in 1994 at 3.6 million, and gains continued for 6 more years.
In the current cycle, private gains peaked at 2.9 million in 2014.
The demographics are very different than from the '80s. The prime working age population was growing very quickly in the '80s, and the prime age population started shrinking starting in 2007 (and bottomed in 2012). So the peak year of this cycle wasn't as strong.
With current demographics, it only takes 60 to 80 thousand jobs added per month to keep the unemployment rate steady (this is far less than in the '80s or '90s). Since we are nearing full employment, my initial guess is the economy will add fewer jobs in 2017 than in 2014 or 2015.
I'll post my Ten Questions for 2017 and some guesses for 2017 in a few weeks.