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More muted jobs growth likely to continue in 2019, analysts say

Following a lower-than-expected jobs report and as economic growth is expected to slow in 2019, employment growth will likely follow a similar trajectory, analysts told S&P Global Market Intelligence.

"When the economy is adjusting from a higher-growth path to a lower-growth path, which is now what we expect in the second half of 2019 and going forward, there are going to be fluctuations like this," said Rajeev Dhawan, the director of the economic forecasting center at the Robinson College of Business at Georgia State University. "One month's data could be really weak, and one month's data could be really normal, which is what's been happening since January."

U.S. employers added 75,000 jobs in May, according to the Bureau of Labor Statistics, coming in below the Econoday consensus estimate of 180,000. BLS data from 2018 show that the lowest number of jobs added in a single month was 108,000 in September, while the lowest figure in 2019 thus far is 56,000 jobs added in February.

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Despite that slowing, employment and jobs growth are at normal levels given the length of the economic recovery, according to Nick Bunker, an economist at the job search website Indeed.

The bureau's most recent Job Openings and Labor Turnover Survey, published June 10, indicated that U.S. job openings were level at 7.4 million on the last business day of April. Wells Fargo Securities said in a research note that "the lack of improvement in job openings points to demand for labor leveling off and suggests that the slowdown in hiring evidenced in Friday's payroll report was not a blip."

Job growth has remained stable enough to keep the unemployment rate at historically low levels and may be a sign of both a tight labor market and weakening demand, according to a June 7 report from S&P Global Ratings.

"This pace was strong enough to keep the unemployment rate steady at 3.6% — a 50-year low. The average hourly earnings increased by 3.1% over the year (was 3.2% in April), marking wage growth above the symbolic 3% mark for the 10th consecutive month," the report reads.

"Is the slowdown in payroll growth an indication of the tight labor market or weakening demand? We think it is a little of both. The underemployment rate — U6 — hit a cyclical low of 7.1% in May while unemployment claims and consumer sentiment remain in "labor happy" state. On the other hand, private fixed investment (and domestic demand, in turn) has clearly weakened, and data out so far for the second quarter are not indicative of a major rebound."

"This is still employment growth and jobs growth that's still strong for what you'd expect at this point in the labor market and the business cycle," he said. "A slowdown is to be expected, but I don't think anyone should interpret that slowdown as a turndown."

Despite market concerns about a recession beginning in the next year, the current employment situation does not support those fears, according to Gordon Gray, director of fiscal policy at the American Action Forum, a Washington, D.C., think tank.

"I don't expect there to be a recession this year," he said. "My expectation is people are going to talk a lot more about recession risk, but that doesn't mean that we're going to have one. A slowing off of 3%, 3+% real GDP growth isn't a recession. It's just we're not going as fast as we were last year."

An April report from Guggenheim Investments stated that the probability of a near-term recession was limited, but its recession dashboard points to a recession starting by mid-2020, following additional flattening of the yield curve and monetary policy tightening. Earlier this month, JPMorgan Chase & Co. said the likelihood of a U.S. recession in the second half of 2019 had risen to 40% from 25% the month before as trade tensions between the U.S. and China escalated, as reported by Bloomberg.