Jobs Day Preview: Does Weakness in the Goods Sector Spell Trouble for the Economy?
Job growth in industries like manufacturing is slowing, but service industries are still going strong.
After a banner 2018, growth in the goods sector (mining and logging, construction, and manufacturing) has been slowing down. This sector is facing headwinds, including intensified trade tensions. But what does a slowing goods sector mean for overall job growth?
Year-over-year, growth in the goods sector has been losing steam, while growth in the services sector has actually sped up slightly. However, the services sector is more than five times the size of the goods sector. So its acceleration in growth means that overall private-sector job growth is around the year-over-year growth rate that it was in the second half of last year, despite the slowdown in the goods sector. If growth in the services sector had not sped up, overall job growth this year would have been around 10-20,000 jobs a month slower. The speed-up in the services sector is coming from faster growth year-over-year in education and health services, leisure and hospitality, wholesale trade, and other services.
Of course, the question moving forward is whether or not slowing growth in the goods sector could pull down the services sector. Goods industries in general are more sensitive to trade wars, commodity prices, and other unpredictable factors. But throughout this recovery, growth in the goods sector has not been correlated with growth in the services sector, suggesting that usually the two sectors are facing different economic situations. So unless and until the issues facing the goods sector spread to the services sector, job growth should continue to be steady this year.
This Friday I’ll be watching to see:
- If wage growth continues above 3%;
- If the percent of workers age 25 to 54 with a job continues to climb year-over-year;
- And if growth in the goods sector continues to slow.