Unempoyment Is at Historic Lows. Why Is Hiring Slowing?
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With your Money Briefing, I'm J.R. Whelan at The Wall Street Journal in New York. The unemployment rate keeps falling, but some numbers indicate the job market might be experiencing a slowdown. We'll hear from the journals heard on the street team to explain in a moment. First, these money and market stories you should know. Economists surveyed by the Journal have ratcheted down their forecasts for employment and economic growth in the first quarter down to 1.3%. That's a sharp drop from the last survey in early February when they predicted a 2% growth rate for January to March. More than 80% of the economists surveyed said they saw a greater risk that the economy would grow more slowly than it would grow more quickly over the next 12 months, and about half mentioned trade policy or China as the biggest threat.
And meanwhile, the Trump administration is considering whether it will expand penalty relief requirements for taxpayers who had too little income taxes withheld from their paychecks. Now, this goes back to the IRS changing the withholding tables early in 2018. That resulted in some workers getting their tax cuts throughout the year and leaving them in the position of owing taxes they hadn't expected to pay now. others owing money at tax filing time may be among the minority whose tax bills went up. Now, taxpayers can normally avoid penalties if they have paid 90% of the current year's taxes owed. In January, the IRS lowered that 90% threshold to 85%, so somebody with a $10,000 income tax bill for 2018
would owe no penalties if they had paid at least $8,500 through withholding or tax payments throughout the year. Congress wants that number reduced further to 80 percent, and Treasury Secretary Steven Mnuchin told Congress the administration will review that reduction within a week.
The unemployment rate dropped to 3.8% in February, but the journals heard on the street team says look deeper into those numbers, and it looks like the labor market might be slowing down. And columnist Justin Layhart is here with some details. So Justin, the unemployment rate percentage is a splashy headlining figure, but as they say, the devil is in the details. What has caught your eye is the initial claims for unemployment insurance.
How are economists revising growth forecasts for Q1 and why does it matter?
Yeah, what we're seeing is that the initial claims for unemployment insurance, they've been drifting up. And for a while there, you could sort of blame a lot of things. The government shutdown, the teacher strike in California, the weather, all those things are sort of, all those excuses are kind of gone now. And, you know, we're definitely seeing signs that the job market is slowing. Now, the jobs report also showed that there were only 20,000 jobs created last month. That really overstates the slowdown. But it definitely seems like that wasn't entirely a fluke, that job growth is slowing. Now, it doesn't mean that the economy is in trouble or anything like that. It just means these signs of weakness that we've seen in the economy are kind of seeping into the job market.
And in terms of unemployment insurance applications, 223,000, where it was gauged to be most recently, that seems like a lot. And that was the latest figure. But historically, it's not a large figure, but it has risen significantly over the past several months.
Yeah, it's risen a fair amount since the fall. It's still not a steep number at all. So, again, you don't worry that we're on the cusp of recession or anything like that. It's just we're not going to see quite the same kind of job growth this year as we did last year. And, you know, getting back to that unemployment rate, we could still see the unemployment rate go down significantly. By a fair amount. And that's just because you don't need a lot of job growth anymore to make the labor market get tighter. Population growth has slowed down. The workforce is aging and aging out.
So that's a really good point is that there's a lot of demographic factors at work here.
Yeah, it's something like, I mean, maybe 50,000 jobs a month, which isn't a lot, is all you really need to keep the unemployment rate where it is at a very low 3.8%.
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