The May jobs data were hugely disappointing. At least that is how the headlines read. Only 38,000 jobs were added and prior months were revised lower, turning the Federal Reserve more cautious.
But at the current stage of this economic recovery, what if slow job growth is no longer an aberration? What if full employment has already been achieved? What if consistent 200,000 monthly-payrolls gains are a thing of the past? That may be the scenario to which investors and Fed officials should get accustomed.
Friday’s jobs report should be improved, but far from stellar. Economists polled by The Wall Street forecast June nonfarm-payroll gains of 165,000, nearly identical to the six-month average of 170,000. Yet that is down from average monthly job gains of 229,000 last year and 251,000 in 2014.
The slowdown seems to be following a historical pattern. At seven years, the current expansion is the fourth longest in the post-World War II era. Dissecting each recovery chronologically into four parts offers a striking trend: Job gains are typically weakest at the beginning and end of economic cycles.
Since the 1960s, job growth in each expansion slowed in the final months compared with the middle of the recovery. For instance, in the expansion from November 2001 through December 2007, the economy added an average of 109,000 monthly jobs in the final 20 months, or last fourth, of that recovery. That is roughly half the monthly job growth witnessed in the 20 months before that.
Similar slowdowns also took place at the end of the 1980s and 1990s expansions.
Hindsight is only so useful, of course. Even if the current recovery really is in the latter innings, that could still mean another two years of expansion. Meanwhile, slower payrolls growth isn’t too shabby. The chances of another shockingly poor report are slim, too.
Assuming labor-force participation stays constant, adding just 118,000 jobs a month over the next year would keep the unemployment rate at a decidedly non-recessionary 4.7%, according to a model constructed by the Federal Reserve Bank of Atlanta.
Slowing job growth shouldn’t be alarming. If anything, it might actually become par for the course.
Write to Steven Russolillo at steven.russolillo[a]wsj.com