The latest jobs and unemployment report released Friday may point to a time in the near future when the U.S. has too few workers rather than too few jobs, according to Ameriprise Senior Economist Russell Price.
But that is a good problem to have for the labor market, according to Price. Likewise, the monthly report released by the U.S. Bureau of Labor Statistics is full of mostly good news, according to economic analysts.
“Despite all the talk over the last few years about artificial intelligence replacing human labor, we are still a long way off from that being a widespread reality,” Price said. “Over the intermediate term at least, businesses need to hire more workers to satisfy growing demand for goods and services. The recently passed tax law is likely to add to those demands and rising wages and salaries is one of the few remaining options for attracting qualified candidates.”
A fly in the ointment is that jobs did not grow during December at quite the pace that had been predicted: Some 148,000 jobs were created, compared to the 180,000 forecasted by economists.
“That is a slight disappointment,” said Ed Keon, managing director and portfolio manager at QMA, a $113 billion quantitative equity and dynamic asset allocation business of PGIM.
The only job sector that was down was retail, which is still experiencing the impact of internet shopping, he added. Wage growth, on the other hand, was in line with the predictions of 2.5 percent year over year.
“Consumer perceptions of their own job security also continue to improve, which should further fuel consumer spending in the months and quarters ahead,” said Price.
Quincy Krosby, chief market strategist at Prudential Financial, said, “Wage growth, while inching higher, remains muted, keeping the closely watched inflation indicators calm.”
But the changes that may occur this year, in part due to tax reform, are unknowable, she said.
“For the market, this report represents 2017,” Krosby said. “The page turns as the effects of tax cuts begin to filter into the economy. We will soon see whether or not hiring and wages move higher in a material way. Investors know the Fed is watching closely and three rate hikes could easily become four.”