January 2019 National Economic Outlook

Executive Summary

The U.S. economy added 312,000 jobs in December, the biggest gain since February. December job growth was well above the consensus expectation of 180,000. The private sector added 301,000 jobs in December, with government employment up by 11,000. There were combined upward revisions to job growth in November and December of 58,000.

• Job growth averaged 220,000 per month in 2018, up from 182,000 in 2017.
  
• The unemployment rate rose 0.2 percentage point in December to 3.9 percent; even with the increase, the unemployment rate is still close to the lowest it has been in the past five decades.
  

The increase in the unemployment rate came primarily from a larger workforce; the labor force increased by 419,000. As a result the labor force participation rate rose to 63.1 percent from 62.9 percent in November; this is the highest the labor force participation rate has been in more than one year.

Despite recession talk in the wake of lower stock prices, the industrial sector held up well at the end of 2018. Industrial production rose 0.3 percent in December, the seventh consecutive monthly increase, and was up 4.0 percent from one year earlier.

Manufacturing production rose 1.1 percent in December, the biggest monthly gain since February, led by a 4.7 percent increase for motor vehicles and parts. Manufacturing production was up 3.2 percent in December on a year-over-year basis.

Mining production rose 1.5 percent in December, as domestic energy production continues to recover after a decline in 2015 and 2016. The capacity utilization rate in manufacturing jumped 0.7 percentage point in December to 76.5 percent, but remains well below its long-run average. Tightening capacity in the industrial sector will support business investment in 2019.

The five-week government shutdown that ended on January 25 has delayed the release of some economic data. Some government offices remained open—in particular, the Labor Department continued to report data on jobs, the unemployment rate, initial claims for unemployment insurance, and inflation. But the Commerce Department was closed, delaying releases on retail sales, exports and imports, housing, consumer income and spending, and GDP, and it will take Commerce time to catch up with its regularly scheduled data releases. This will make it more difficult to gauge what is going on in the U.S. economy in early 2019.

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

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