Despite all the noise from DC about a booming economy and massive job growth, the U.S. economy created fewer jobs in 2017 than in 2016 and economic growth was moderate.
U.S. job growth slowed in 2017 to an average of 171,000 jobs created per month, down from an average of 186,000 jobs created each month in 2016. 2017 was also had the lowest U.S. job creation total since 2010.
The peak recent year for job creation was 2014, when an average of 250,000 jobs were created each month. The chart below on U.S. job growth comes from the Yahoo Finance article Challenge for Trump: Job Growth is Slowing. The data is from the U.S. Bureau of Labor Statistics.
Wages also grew at a stubbornly slow rate in 2017, increasing 2.5%.
But despite slowing job growth, the economy performed well in 2017. It's also looking good for 2018.
Consumer confidence is high, the stock market continues to rally and there are signs wages may be starting to increase at a faster clip. We also start 2018 with a very low unemployment rate of 4.1%.
Most economists see a continuation of moderate U.S. economic growth in 2018 of around 2.8% to 3.0%. This is a bit better than the past few years, but not by much.
Economists also see labor shortages constraining economic growth. Simply put, with such a low unemployment rate the concern is there aren't enough workers to drive faster economic growth.
While we agree 2018 will see another of moderate economic growth, we think the economy will do a bit better than the consensus.
Global economic conditions are good and the recent U.S. tax cuts should bump the economy a bit next year.
The "wealth effect" created by stock market, although not as strong as in the past because fewer households directly benefit, should also help.
For these reasons we think U.S. economic growth will be more robust and in the 3.3% range in 2018.
The economic downsides currently appear to be limited.
Having said that, we have a very unpredictable political environment. Potential problems that could hurt the economy include trade wars and even shooting wars.
We also think 2018 could be a good year for wages. As mentioned above, there is some evidence wages are starting to increase. And we believe the labor shortages that are occurring in some sectors of the economy will likely spread.
Despite a continued strong job market, we expect the number of independent workers will increase again in 2018. The trends driving the growth of the gig economy remain in place and a strong job market is not enough to offset them.
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