Are the waves of job growth in the United States slowing to a trickle?
Thursday morning (Sept. 6), Moody’s Analytics and ADP reported that private payrolls grew at their slowest pace since October 2017. In terms of numbers, firms added about 163,000 positions for the month, which missed Reuters’ estimate of 190,000. That tally also represents a slowdown from an average pace of about 206,000 positions added monthly, and a marked deceleration from the 217,000 jobs that had been added in July. Drilling down a bit, August showed rather anemic gains in small business hiring, which was up only 19,000 positions — small businesses are defined as those with fewer than 50 employees.
The bulk of gains seen last month came from mid-sized firms with up to 499 employees, where 111,000 jobs were added. Service providers made up most of the job gains at 139,000 positions. The data released by Moody’s and ADP also showed that, within the service provider designation, professional ad business services led the way, with 35,000 positions created.
In an interview with analysts and media after the numbers were released, Mark Zandi, chief economist at Moody’s, said that smaller firms are among those finding it relatively harder to fill job openings.
Overall, he said, the report could be characterized as being “good, if a bit on the soft side.”
He noted that the August weakness could be traced to a number of factors, both technical and fundamental. In reference to the technical aspect, he said that “August is always a tricky month” as it tends, traditionally, to show some softness as response rates to Moody’s and ADP’s surveys are lower, with many people on vacation. On the fundamental side of the equation, he said, the tightening labor market is eating into job growth, especially among smaller firms, where the trend, once at one million new positions created annually, is on track to notch gains of 500,000 positions. Even with this pace, unemployment continues to decline.
One development bears watching, Zandi said, as there uncertainty still remains uncertainty over the trade war being waged between nations, impacting job growth at large U.S. multinational companies. Mid-sized firms are still showing solid job growth, and larger firms added 31,000 positions.
In response to questions about the overall impact of that trade war — specifically, the impact on U.S. GDP as the current administration levies tariffs on Chinese goods — Zandi noted that tariffs have been slapped on roughly $110 billion of Chinese products to date. That action will shave as much as one tenth of one percent off GDP growth through the next year and drag on jobs to the tune of 10,000 to 15,000 positions per month. Should the latest round of rumored tariffs be put in place, on an incremental $200 billion of Chinese goods, a full quarter point of GDP growth could be cut, he said, noting that “you will start to feel it.”