U.S. employment has been solid as a rock for years. But now some worries are starting to emerge.
“The job market is losing its shine,” Mark Zandi of Moody’s Analytics said yesterday after private-sector payroll growth missed estimates by a mile. “Openings are declining and if job growth slows any further unemployment will increase.”
His warning comes shortly before some major reports that could show the direction of the world’s biggest economy into year end. The government’s non-farm payrolls report, often the biggest data point of the month, is due tomorrow morning.
Forecasters are looking for the addition of about 180,000 jobs. A significant miss could make people start talking about recession. That’s especially true if earlier reports get revised lower.
Factories, Construction Weak
The problem has been a slowdown in manufacturing and construction, often called “goods-producing.” Both spiked in 2017 thanks to President Trump’s tax reforms, but slowed as they wore off. His trade wars against China and Europe have also hurt by making companies afraid to invest.
Services have filled the void recently. That includes business-related jobs, health-care and leisure. Expectations for the broader economy could darken if tomorrow’s report shows this corner of the labor market slowing.
But there’s a wildcard next week with the Federal Reserve meeting on Tuesday and Wednesday. No one expects an interest rate cut, but everyone will scan the statement at 2 p.m. ET on December 11 for signs of movement in that direction.
Banks or Bullion?
Remember, Fed Chairman Jerome Powell said last month he saw no major bubbles and expressed a commitment to 2 percent inflation. Those two positions, combined with potentially weak job growth tomorrow, would likely make traders start looking for the central bank to make a dovish turn.
There are two ways the market could react. If non-farm payrolls miss, investors could buy gold in hope of further rate cuts. But a strong reading could make them look for rates to increase over time. That, in turn could favor banks and industrials.
Investors will also get retail-sales data for November the Friday after the Fed. The following week has some housing data and then we drift into the holidays.
In conclusion, the U.S. economy has been the strongest in the world for several years. Healthy job growth and low unemployment have been two of its main pillars. Some numbers coming soon could help us know whether the decade-long trend is finally nearing an end.