State of the Labor Market

Jobs Day Preview: The Economy Is Still Adding Jobs, but the Future Is Uncertain

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The number of jobs we’ve added in recent months is solid, but the trend is downward

In May, the economy added only 75,000 jobs — but we all know that month-to-month job growth can be volatile. Over the last three months, the economy has added around an average of 150,000 jobs a month, a solid number that is above what is needed to find jobs for people entering the workforce. 

So why does the direction of the economy suddenly feel so uncertain? Perhaps because the decline in the number of jobs added has been rapid. In January, the average number of jobs added over the last three months was 245,000. By May, that had fallen to around 150,000.

We’ve seen rapid declines in the three-month moving average before, such as at the beginning of 2015 and 2016. And this recovery has punched through declines before: in 2012, the three-month moving average fell from 285,000 in March to 85,000 in June. After that, job growth resumed its solid pace. 

The current quick decline, however, combined with slowing wage growth and the current policy environment, is worrisome. Assuming no revisions to previous months, if fewer than around 150,000 jobs were added in June, the three-month moving average will fall — but if we added more, the average will go back up. 

If job growth steadies or wage growth starts accelerating again, it would be a reassurance that the economy is merely slowing down, as might be expected at this point in the economic cycle. But if job growth continues to slow, the prospects for the rest of the year will look even more uncertain. 

This month I’ll be looking to see:

  1. If the jobs growth numbers continue to trend down;
  2. And if wage growth starts to accelerate again. 


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