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

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, Nonfarm Private Public
1997 3,407 3,212 195
1998 3,048 2,735 313
1999 3,179 2,718 461
2000 1,936 1,672 264
2001 -1,725 -2,276 551
2002 -509 -742 233
2003 117 159 -42
2004 2,039 1,892 147
2005 2,524 2,338 186
2006 2,100 1,891 209
2007 1,141 853 288
2008 -3,552 -3,732 180
2009 -5,053 -4,979 -74
2010 1,035 1,251 -216
2011 2,075 2,387 -312
2012 2,174 2,241 -67
2013 2,302 2,369 -67
2014 3,006 2,879 127
2015 2,729 2,574 155
2016 2,318 2,116 202
2017 2,153 2,068 85
20181 2,679 2,583 96
20192 2,204 2,042 162
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)
2006 152 -178
2007 -195 -269
2008 -789 -896
2009 -1,047 -1,375
2010 -187 120
2011 144 207
2012 113 158
2013 208 123
2014 361 209
2015 339 70
2016 193 -7
2017 268 190
2018 307 264
20191 146 56
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 #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?

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