By Steven R. Drexel, President, and CEO of Cornerstone Staffing Solutions, Inc.

As an Economist and seasoned staffing industry professional, I’m regularly asked to participate in several monthly surveys and discussions that predict key elements of the Bureau of Labor Statistics’ (“BLS”) press releases describing The Employment Situation. The next release revealing August’s statistics will be out on Friday, September 1st, (typically the first Friday of each month reporting on the previous month’s activity).

The BLS offers many statistics covering weekly, monthly, quarterly, and yearly data and comparisons. Insofar as I dive deep into the data (national, industry and company), this commentary shares my thoughts and observations directly related to predicting how July will perform compared to the recent past. Cornerstone’s stakeholders and other interested parties may find the following remarks helpful in assisting with business strategies and objectives for the near term.

August’s Expected Employment Highlights

I expect that August produced a solid 180,000 net new jobs and a stable unemployment rate at 4.3 percent. August’s employment related economic releases suggest that the labor market remains healthy — but the plus 200,000 increase reported last month is not sustainable going forward, this deep into the expansion. The average monthly rate of job growth so far this year has been about 184,000 jobs. I believe that growth during August was slightly less than average, and below the 200,000 thresholds that have been breached a remarkable five times during 2017. All indicators suggest that demand remains strong but the availability of talent is the limiting factor. Broader economic growth during the current expansion remains consistently subdued, but remarkably long-running as employment has grown for an impressive 82 uninterrupted months. The cumulative impact of this long-running expansion is an escalating war for talent. More detailed evidence and statistics follow to support my prediction.

August’s report will be closely followed as analysts look for signs that business confidence may be waning as well as indications that the economy may be running out of steam. Employment growth has been more resilient than the broader economy. Year-to-date job growth has been consistent with higher levels of business confidence apparent since the national election. So far, slower than expected legislative progress in Washington, DC has not curtailed activity or confidence. The employment report is an important release because it is based on a huge survey. Moreover, hiring and firing decisions evident in the report reflect the mood and expectations of vast and important segments of the economy.

Positive employment-related economic indicators related to August’s activity included the following:

– Initial Jobless Claims and Continuing Jobless Claims were flat to slightly improved during August. Both metrics have been on a persistently favorable, long-term trend, recent results suggest that August’s employment growth should remain strong.
– The Conference Board’s Consumer Confidence Index improved during August and the differential between “jobs plentiful” versus “jobs hard to get” was a net 18.1 during August, up from 14.5 during July. This is a very strong indicator of confidence in current conditions.
– The American Staffing Association’s Monthly Index was improved during August compared to July suggesting another strong month.
– Regional Federal Reserve Surveys with employment sub-indexes that improved during August included the following:

• Kansas City Fed Manufacturing Survey;
• NY Empire State Manufacturing Survey;
• Richmond Fed Manufacturing Survey; and
• Texas Manufacturing Outlook Survey.

– The private employment surveys that I participate in continued to suggest growth in demand during August although meeting the demand with an increasingly limited workforce is challenging.

Employment indicators that were down with respect to August employment included the following:

– The Wall Street Journal’s Survey of economists forecast of employment growth for August called for a slowing of growth compared to July.
– The Regional Federal Reserve Surveys with employment sub-indexes that deteriorated during August included only the Philadelphia Fed Manufacturing Business Outlook Survey.

Expectations for Q3 2017 and beyond.

There has been a mild softening of the consensus forecast for economic growth recently when compared to the outlooks prepared six months ago. Generally, the most recent estimates for Gross Domestic Product during the coming quarters and annual periods through 2020 are down one or two tenths for each of the forecast intervals. The magnitude of the changes is not overly concerning or noteworthy. However, the direction and consistency of the adjustments are worth observing because it potentially marks a change in momentum. One of the more significant changes in the forecast relates to the unemployment rate which is now expected to drift three to four tenths lower over the forecast horizon bringing the rate down close to 4.0 percent. This suggests that structural changes in the workforce (i.e., on average older or otherwise less engaged workers) has created more slack in the labor market allowing for a lower natural rate of full employment. A forecast component that has not changed much over time is the rate of growth in employment. Despite the weaker overall growth and a lower unemployment rate, the consensus calls for a continuation of the very gradual decline in the annual growth rate of an employed worker. This suggests that demand will remain strong but employment growth will slow with fewer workers available.

In the shorter term, the expansion is aging but inflation remains remarkably mild in key sectors like the labor market, industrial production, retails sales, corporate profits, housing, and improving broad-based global growth are all positive and self-reinforcing. Average hourly earnings have room to improve as does the labor force participation rate, the share of unemployment that is long-term as well as the prime-age employment to population ratio. These metrics suggest that there is still capacity for further growth despite the historically low unemployment rate and the unusually long running expansion. And yet, as the expansion ages, there is a logical limit to the rate of growth. Expect jobs growth during 2017 to average about 180,000 positions per month while the unemployment rate trends slightly down during the next three years settling at just below 4.0 percent by year-end 2019. The risk of recession remains low given the absence of any signs of overheating or any looming financial bubble — therefore, the general expansion should continue through 2020.

I invite you to share this commentary with your colleagues and professional network. Please feel free to contact me if you have any questions or comments.