Thursday, January 02, 2020

Question #2 for 2020: Will job creation in 2020 be as strong as in 2019?

by Calculated Risk on 1/02/2020 10:32:00 AM

Earlier I posted some questions for next year: Ten Economic Questions for 2020. I'm adding some thoughts, and maybe some predictions for each question.

2) Employment: Through November 2019, the economy added 1,969,000 jobs, or 179,000 per month. This was down from 2018. Will job creation in 2020 be as strong as in 2019? Will job creation pick up in 2020? Or will job creation slow further in 2020?

For review, here is a table of the annual change in total nonfarm, private and public sector payrolls jobs since 1997.  For total and private employment gains, 2014 was the best year since the '90s, and it appears job growth peaked for this cycle in 2014.

Change in Payroll Jobs per Year (000s)
Total, NonfarmPrivatePublic
19973,4073,212195
19983,0482,735313
19993,1792,718461
20001,9361,672264
2001-1,725-2,276551
2002-509-742233
2003117159-42
20042,0391,892147
20052,5242,338186
20062,1001,891209
20071,141853288
2008-3,552-3,732180
2009-5,053-4,979-74
20101,0351,251-216
20112,0752,387-312
20122,1742,241-67
20132,3022,369-67
20143,0062,879127
20152,7292,574155
20162,3182,116202
20172,1532,06885
201812,6792,58396
201922,2042,042162
1Job growth in 2018 and early 2019 is expected to be revised down significantly.
22019 is year-over-year job gains through November

The good news is job market still has solid momentum heading into 2020.

Note: Some people compare to the '80s and '90s, without thinking about changing demographics. The prime working age population (25 to 54 years old) was growing 2.2% per year in the '80s, and 1.3% per year in the '90s. The prime working age population has actually declined slightly in the '10s. Note: The prime working age population appears to be growing slowly again, and growth should pick up in the 2020s.

Note that some people will be confused by the Census hiring and firing.  In May 2010, the Census hired 411,000 people.   More than half were let go in June - the rest over the next several months.  The Census will distort the headline employment numbers again in 2020, especially in April, May, June and July.

The second table shows the change in construction and manufacturing payrolls starting in 2006.

Construction Jobs (000s)Manufacturing (000s)
2006152-178
2007-195-269
2008-789-896
2009-1,047-1,375
2010-187120
2011144207
2012113158
2013208123
2014361209
201533970
2016193-7
2017268190
2018307264
2019114656
12019 is Year-over-year job gains through November

Energy related construction and manufacturing hiring was solid in 2017 and 2018 as oil prices increased.  However, in 2019, energy related employment was probably weak since oil price had fallen sharply at the end of 2018.   Also, there was general weakness in manufacturing in 2019 due to the trade war, and the lack of growth in the auto sector.   With easing trade tensions, manufacturing employment gains might increase in 2020, and with a pickup in construction activity, construction employment might increase too.

However, my sense is the overall participation rate will decline slightly in 2020 (due to demographics), and employers will have more difficultly in finding employees to replace them.

So my forecast is for gains of around 125,000 to 150,000 payroll jobs per month in 2020 (about 1.5 million to 1.8 million year-over-year) .  This would be the fewest job gains since 2010, but another solid year for employment gains given current demographics.

Here are the Ten Economic Questions for 2020 and a few predictions:

Question #1 for 2020: How much will the economy grow in 2020?
Question #2 for 2020: Will job creation in 2020 be as strong as in 2019?
Question #3 for 2020: What will the unemployment rate be in December 2020?
Question #4 for 2020: Will the overall participation rate start declining in 2020, or will it move more sideways (or slightly up) in 2020?
Question #5 for 2020: How much will wages increase in 2020?
Question #6 for 2020: Will the core inflation rate rise in 2020? Will too much inflation be a concern in 2020?
Question #7 for 2020: Will the Fed cut or raise rates in 2020, and if so, by how much?
Question #8 for 2020: How much will RI increase in 2020? How about housing starts and new home sales in 2020?
Question #9 for 2020: What will happen with house prices in 2020?
Question #10 for 2020: Will housing inventory increase or decrease in 2020?