Fleet Management

Economic Watch: Trucking Helps With Most Recent Job Gains, Consumer Sentiment Cools

December 08, 2017

By Evan Lockridge

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The U.S. economy added another 228,000 non-farm jobs in November, aided by job gains in the trucking industry, according to a Labor Department report released Friday.

The performance was better than a consensus estimate from analysts, who forecast jobs would grow by 200,000 during the month.

Employment continued to trend upward in the professional and business services, manufacturing, and health care sectors. Growth has averaged 174,000 per month so far this year, compared with an average monthly gain of 187,000 in 2016.

The department also revised the October figure to 244,000 job additions, down from its previously estimated number of 261,000. September was moved higher to 38,000, first reported as an 18,000-job gain.

There were 1,800 for-hire trucking jobs added in November. The wider transportation and warehousing sector reported 10,500 job gains, most in the warehousing and storage sector.

The nation’s unemployment rate remained at 4.1% – but that is still a 17-year low.

The department also reported that in November, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.55. Over the past year, average hourly earnings have risen by only 2.5%, indicating employers are keeping a lid on payroll expenses.

This followed a report the day before from payroll processor ADP that showed private-sector employers added 190,000 jobs in November.

“The job market is red hot, with broad-based job gains across industries and company sizes,” said Mark Zandi, chief economist of Moody’s Analytics, about the ADP report. “The only soft spots are in industries being disrupted by technology, brick-and-mortar retailing being the best example. There is a mounting threat that the job market will overheat next year.”

Interest Hike Likely

Analysts at RBC Economics Research said the Labor Department report gives the Federal Reserve a green light to raise interest rates when it meets next Wednesday.

"With hurricane-related volatility largely behind us, economic conditions are clearly strong enough for businesses to continue hiring at an impressive pace for this point in the cycle,” said RBC Economist Josh Nye. “Unemployment was steady in November, but if job growth continues at the 170,000 rate seen over the last three months, the jobless rate should drift even further below what the Fed sees as sustainable in the longer run.”

He said with a move at December’s Fed meeting widely expected, attention will be focused on how the central bank sees monetary policy evolving in 2018.

"Key to that debate will be wage and inflation dynamics. The Fed can only raise rates so much in anticipation of increasing price pressures, [and] we’ll need to see wage growth and inflation actually picking up for the committee to hike more than once or twice next year,” Nye said.

He noted while wage growth ticked higher in November, it remained at the lower end of the range seen over the last two years.

“An upward trend will need to continue for policymakers to become confident that rising labor costs are putting a floor under inflation,” Nye said. “For our part, we expect a 4% unemployment rate, combined with what is clearly strong hiring demand, will boost wage growth next year, helping inflation return to 2% on a sustained basis. If upcoming payroll and inflation reports provide evidence of that dynamic, we think the Fed will raise rates once a quarter in 2018.”

Consumer Sentiment Down From October Peak

Also released Friday were preliminary numbers from the University of Michigan’s Survey of Consumers, showing consumer sentiment, while strong, is down from October's peak.

While consumer feelings about current economic conditions moved higher this month compared to November and the same time a year earlier, expectations about the future dimmed slightly.

“Most of the recent decline was concentrated in the long-term prospects for the economy, while consumers thought current economic conditions have continued to improve,” said Surveys of Consumers Chief Economist Richard Curtin. “Importantly, the largest decline in long-term economic prospects was recorded among Democrats, which reflected their concerns about the impact of the proposed changes in taxes.”

He said perhaps the most important changes in early December were higher income expectations, as well as a higher expected inflation rate in 2018.

“Income gains have been slowly improving during the past year, and the data indicate that trend has continued,” Curtin said. “In contrast, the rise in inflation expectations in early December was a surprise, and confidence in this finding must await confirmation in the months ahead before any inferences are drawn."

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