By all accounts, 2018 was a banner year for the U.S. labor market. Last year, employers added more than 2.6 million new jobs, or, almost 220,000 per month. This was well above 2017’s gain of nearly 2.2 million and the 2008-2017 10-year annual average of just 921,000.
On Jan. 4, the Department of Labor released its monthly employment report for December. Last month, an impressive 312,000 new jobs were added, well above the 180,000 the market was expecting. The national unemployment rate did rise from a 50-year low of 3.7 percent to 3.9 percent. However, the rate increase was not driven by Americans losing jobs, but rather from the influx of 419,000 new job seekers that entered the civilian labor force.
So what specific industries fueled this surge in the U.S. labor market last year?
The largest gain was in the professional and business services sector, which accounted for 22 percent (583,000) of the nation’s 2.6 million new jobs last year. This includes industries such as computer systems design, consulting, employment services and administrative and support services, among others.
The health care and social assistance industry tallied the second largest gain, adding 460,200 new jobs last year. The bronze medal went to the leisure and hospitality industry (306,000) while manufacturing (282,000) and construction (280,000) rounded out the Top 5. The information industry, which includes publishing and telecommunications, performed the worst, losing 16,000 jobs last year.
But what about this year? Should we expect employers to continue their hiring boom into 2019?
Fortunately, the projections for the 2019 labor market look good. The unemployment rate should further decline to just 3.5 percent, a 50-year low. And according to the Department of Labor, there are nearly 6.9 million job openings in the U.S. This translates to an excess of 600,000 more job openings than the current 6.3 million Americans who are unemployed and actively seeking work.
The strength in employment should also keep upward pressure on employee wages. For the past three months, annual wage growth has surged to its fastest pace in nearly a decade. In December, annual wage growth was reported at 3.2 percent. For 2018, wage growth averaged 2.9 percent, soaring past the anemic 2.3 percent average pace for much of the past 10 years.
Despite the optimism for the labor market, there remain legitimate concerns over the continued strength of the U.S. economy. This year, the economy is expected to grow at an annual rate of just 2.3 percent, far below the 2018 third quarter rate of 3.4 percent. The fourth quarter growth rate, to be released on Jan. 30, is expected at 2.8 percent.
The broader global economy continues to weaken, specifically, China – the world’s second-largest economy – and Europe. Also, our ongoing trade dispute with China has raised questions on the impact to American corporations. China is our largest trading partner and the third largest importer of U.S. goods. Finally, the recent volatility in the stock market reflects the angst over the Federal Reserve’s agenda for future interest rate hikes, which would further restrict economic growth.
So far, the labor market has shrugged off most of these concerns that weigh on our economy. But at the heart of the labor market’s success is a robust and vibrant economy — one that drives employers to seek out labor to satisfy its consumer demand for goods and services. Yes, 2018 was indeed a banner year for the labor market. Let’s hope 2019 can somehow match that success.