September 2019 National Economic Outlook

Executive Summary

Job growth slowed in August to 130,000, and was also revised lower in June (178,000 jobs added) and July (159,000 jobs) by a combined 20,000.  Job growth has averaged 156,000 over the past three months, down from 168,000 per month in the year through March 2019 (taking into account preliminary revisions).

• Private-sector job growth was soft in August at 96,000, down from an average of 124,000 in the previous three months.


• The unemployment rate held steady at 3.7 percent for a third straight month in August. Outside of a 3.6 percent rate in April and May, this is the lowest the unemployment rate has been in 50 years.

One bright spot in August was income. Wage growth picked up as average hourly earnings rose 0.39 percent in August from July, the biggest one-month gain in a year. Wage growth was also revised higher in June and July. Year-over-year growth in wages was 3.2 percent in August, down from an upwardly revised 3.3 percent in July. Wage growth remains well above the pace of inflation.

The Federal Open Market Committee cut the fed funds rate by 0.25 percentage point in mid-September, to a range of 1.75 to 2.00 percent. This followed a rate cut of the same size in late July.

The September 18 FOMC statement noted that economic conditions remain solid, and that the most likely outcome is continued growth, but noted uncertainty about the outlook. Given this, and inflation that is lower than the central bank would like, the FOMC decided to cut the fed funds rate.

In recent public statements Fed Chair Powell has discussed a “mid-cycle adjustment,” suggesting that the FOMC may cut rates a few times to support growth, but not engage in a full-blown easing cycle. There was more dissension than usual in September; one FOMC member favored a bigger rate cut, while two favored no rate cut.

Housing data have been better in recent months. Housing starts rose 12 percent in August from July, including a 4 percent increase in single-family starts. Housing permits were also higher over the month, up 8 percent, including an almost 6 percent increase in single-family permits; this points to further increases in homebuilding in the near future.

Existing home sales also rose in August. A decline in mortgage rates of more than one percentage point since the fall of 2018, as well as the good labor market, are boosting home sales and construction.

Residential construction has been a negative for the economy for most of the past two years, but should contribute to growth in the third quarter.

Our economics team is consistently analyzing and forecasting national, regional and global economic trends.

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