Like the rest of the US economy, the labour market is split between sluggish manufacturing and a much stronger services sector, but both appear to have averted falling into recession at the end of the third quarter.

Nonfarm employment was up by 1.46 per cent in the three months between September and November compared with the same period a year earlier, according to data from the US Bureau of Labor Statistics published on Friday.

Employment growth has decelerated from a peak rate of 1.84 per cent at the end of 2018 and the start of 2019, but is no longer slowing further, which indicates the worst of the business cycle slump may be over.

Manufacturing has been hit much harder by the shock caused by the US-China trade war, while the larger and more domestically focused services sector has weathered the confrontation with less impact.

Manufacturing employment was up by just 0.6 per cent in the three months between September and November compared with a year earlier, while private service-sector jobs increased by 1.7 per cent.

Manufacturing jobs command an average weekly earnings premium of 23 per cent compared with the private service sector (“Current employment statistics”, BLS, Nov. 6).

Nonetheless, the labour market overall remains tight enough to deliver economy-wide earnings growth of almost 1.2 per cent year-on-year, after inflation, close to its fastest for three years.

Real consumer incomes and expenditures are both rising at around 2.5 per cent per year, down from more than 3.0 per cent a year ago, but well below the levels that would indicate a recession.

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Consumer sentiment has also improved since the end of the third quarter, with preliminary results from the University of Michigan’s survey showing confidence bouncing back in December to its highest level since May.

The Federal Reserve’s three quarter-point interest rate cuts, coupled with an escalation pause in the US-China trade conflict, and a renewed rise in equity prices, seem to have steadied the economy over the last three months.

If business conditions in manufacturing are not yet improving, they are at least not getting any worse, and the services sector continues to report slow but steady growth.

Business investment spending remains stalled but household consumption spending is still rising at a modest rate which should ensure the economy continues expanding.

Provided the economy can avoid any more shocks, especially the introduction of higher tariffs on imports from China in mid-December, it looks like having modest momentum going into 2020.





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