Longest Job Expansion Continues: 98 Months

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Today the Bureau of Labor Statistics reported jobs data for November 2018. Payroll jobs grew at 155,000 which means that the longest job expansion streak continues, now for 98 months. The job numbers miss expectations due to a loss in jobs in mining, government and information.  Job creation in 2018 has beaten my expectations by a lot. This has been one the best job creation years we have had in recent history–especially when one takes into account the duration of this economic expansion and our demographics.  We are now 7 months away from having the longest economic expansion ever recorded in U.S. history.

At the beginning of the year, I anticipated we would create 157,000 jobs per month, at best. Year to date, we are pushing an average of 206,000 jobs per month. I don’t believe this rate of job creation can last. The three month average is running at 170,000 but for now let’s enjoy how well the U.S. job market is doing in 2018.

In 2017 I wrote:

“For 2018 I am predicting monthly job creation numbers in the 157,000 – 129,000 range, which is still well above population growth, but lower than last year. With over 6,000,000 job openings in play that number should be attainable.” 

https://loganmohtashami.com/2017/12/31/2018-economic-housing-predictions/     

From BLS: https://www.bls.gov/news.release/pdf/empsit.pdf

“Total non-farm payroll employment increased by 155,000 in November, and the unemployment rateremained unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in manufacturing, and in transportation and warehousing”

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This a breakdown of the jobs created for the last month.

From BLS: 
https://www.bls.gov/charts/employment-situation/employment-by-industry-monthly-changes.htm

Dece,mber Jobs breakdown

This is a look at the earnings breakdown for the previous month.

From BLS: 
https://www.bls.gov/charts/employment-situation/employment-and-average-hourly-earnings-by-industry-bubble.htm

December wage break Jobs
Wage growth is running at 3.1% on a 12-month average. The 3-month average fell to 2.7%. This means that real wage growth is increasing, since headline CPI inflation has been falling from the recent highs. Lower oil prices will boost the real average hourly wage data. 

From Atlanta Fed: 
https://www.frbatlanta.org/chcs/labor-report-first-look.aspx?panel=1
December wage growth

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2018/11/14/consumer-price-index-october-headline-at-2-52
November CPI short

Job growth continues to outperform my expectations. We are producing over double the number of jobs needed for population growth.  This is a solid reflection of our American work ethic, especially considering the duration of this economic cycle.

Today, the U6 Unemployment Rate is still below the pre-recessions lows.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2018/12/07/november-jobs-report-155k-new-jobs-worse-than-forecast

December U6

Yield inversion!

Those who have followed me over the past year know that my big economic call for 2018 was that yields would invert in 2018.  I am typically thought of as an economic expansion bull, so this prediction caught many by surprise.  However this call is consistent with my belief that 10 year yield won’t break away from 3% unless we really see hard core inflation take off. Since the Fed has been raising rates it only made sense for me to call for a yield inversion in 2018.  Recently, the 2/5’s and 3/5’s have inverted and we got to below 10 basis point spread on the 2/10 yields this week.

At the recent 2018 Economic Throw Down conference in Mission Viejo some of the speakers suggested that we would see higher rates and four rate hikes in 2019. I took a different stance. On that date (November 8th, 2018) the  10-year yield was at 3.24% and 2-year yield was at 2.96%. This week the 10-year yield got as low as 2.83% and the 2-year yield got as low as 2.69%.  This places significant doubt on the “4-rate hikes in 2019”  prediction

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Now that OPEC has agreed to some production cuts, the downside to oil is somewhat limited ($43 for WTIC) , so inflation expectations most likely won’t go down too much. However, let this be a reminder to those who call for higher rates and higher inflation, don’t count your chicken just yet.

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami