The economy is starting the decade strong with a sturdy foundation due to low unemployment and interest rates.
The U.S. added 145,000 new jobs in December, capping off the ninth straight year where the economy created more than 2 million jobs. New hiring over the last decade has pushed the unemployment rate down to 3.5%, a 50-year low.
Household spending could decrease in 2020 due to the increase in hourly pay, which fell below 3% in the past 12 months. Yearly wage growth previously peaked at 3.4% last spring but has been falling since then. Scott Anderson, chief economist at Bank of the West, says that the lack of growth in worker wages will “make it harder for consumers to keep spending at their 2019 pace in 2020”. If wages continue to grow however, 2020 can produce the same impressive results of 2019.
Fortunately, Americans are secure with their jobs, surveys show they are confident in the economy, this was proven by a swell in holiday spending. Economists predicted that retail sales likely rose around 0.4% in December. In a win for Americans, the Federal Reserve cut the cost of borrowing in the latter half of last year. Additionally, the Federal Reserve is believed to keep U.S. interest rates low for another year or more. Despite the decrease in wage growth and the tightest labor market in half a century, inflation is not a substantial threat to the economy.
Sal Guatieri , senior economist of BMO Capital Markets summarized the market saying, “The economy looks to head into the new decade with a little more zip than we thought,” he continued, “While this may not foreshadow another decade of uninterrupted growth, it should keep recession fears at bay.”