Job growth slowdown a sign of tightening economy

February 4
8:53 AM 2016

After encouragingly rising for the past two years, the US job growth may slowdown in the near future. This further indicates the tightening of the world's largest economy. The credit conditions across the US indicate tightening of economy. There's possible liquidity crisis in the near future forcing corporate sector to post pone their hiring plans. 

The US employers added 205,000 jobs in the private sector in January as against 267,000 in December. The US economy generated 292,000 jobs in December 2015 as against the average job creation of 281,000 during the quarter. The job growth seems to slowdown soon, according to a latest opinion survey carried out by a senior loan officer. The survey reveals that credit conditions in the US economy started tightening. 

Business Insider reports that businesses could face more challenges as economy is tightening. Many business firms may face challenging situation in raising additional funds. This tightening of economy may also slow down the hiring. Many corporate firms put their recruitment plans on hold.

Don Rissmiller at Strategas Research Partners said in a note to clients that "while US employment growth is still solid as the business cycle matures, it is normal for job growth to slow. That peak in growth to be happening this cycle based on the Fed's senior loan officer survey."

Contrary to this, ADP private sector report has indicated solid job growth despite market turmoil. The hiring in the private sector rose marginally in January 2016 when compared to December 2016 data. However, the job growth surpassed the forecasts. Employers added 205,000 jobs in the private sector in January as against 267,000 in December, according to a latest survey by ADP. Moody's Analytics has prepared the report using ADP's data.

The average forecast by economists in a poll carried out by The Wall Street Journal (WSJ) was at 190,000 jobs for December month, but actual reported surge was 257,000 jobs during the month. The overall job growth was encouraging despite a slowdown in growth during the fourth quarter. The selloff in financial markets this year so far is also causing more concerns about the US economy, as reported by Market Watch

The US manufacturing sector couldn't generate additional jobs in January. The jobs generation in the US manufacturing sector was down from a marginal gain of 4,000 in December. However, the construction sector added 21,000 new jobs in January. However, it's below the job creation of 3,000 in December. 

Los Angeles Times reports that the US hiring during January slowed down. But, private sector recruitment was remained positive. The US labor market was able to withstand the impact of selloff in the financial markets. Economists forecast further slowdown in jobs growth after encouragingly completing 2015. The sluggish stock markets in the wake of concerns about global economy slowdown are impacting the business confidence. 

Mark Zandi, chief economist of Moody's Analytics, said: "Job growth remains strong despite the turmoil in the global economy and financial markets." Though manufacturers and energy companies are reducing payrolls, job gains across all other industry sectors remain positive. The US economy is on track to return to full employment by mid-2016,

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