Positive jobs reports in January arrive as economists warn of slower growth; odd time for big state spending increases.

Good jobs reports from ADP and NFIB came out this week. A Wall Street Journal survey of economists, though, warns of slower growth ahead. So it’s more than a little odd that some state governments, notably including Washington, are pitching large spending increases.

Let’s review the news.

CNBC reports,

Private payrolls grew in January at a much faster pace than expected as the labor market shrugged off the longest U.S. government shutdown in history, according to data released Wednesday by ADP and Moody’s Analytics.

Companies added 213,000 jobs this month, the data show. Economists polled by Refinitiv expected payrolls to grow by 178,000.

Today’s jobs report from NFIB continues the job-growth theme:

Small businesses started the new year by adding a net addition of 0.33 workers per firm, the best reading since July 2018, according to NFIB’s monthly jobs report, released today. Fifteen percent of owners are increasing employment an average of 3.1 workers per firm and seven percent reported reducing employment an average of 3.0 workers per firm.

The report hints of a possible slowdown.

“Based on small business employment and hiring plans, owners aren’t expecting much of an economic slowdown in the first half of the year,” said NFIB’s Chief Economist Bill Dunkelberg. “There is a significant shortage of qualified workers that could slow down businesses, but for the most part owners are working hard to hire and attract qualified employees.”

That hint takes on a sharper dimension in a Wall Street Journal survey of economists.

The U.S. economy’s brief flirtation with 3% growth is over for now, economists say, cut short by a dimming global outlook, market tremors and sluggish business investment.

Gross domestic product, or the total value of goods and services produced in the U.S., grew at a 2.6% annual rate in the fourth quarter, economists estimate in a Wall Street Journal survey conducted this week. Output will grow at a 1.8% clip in the first quarter and a 2.5% rate in the second quarter, according to the poll.

That would average out to 2.3% growth for the nine-month period through this June—not bad, but slower than the 3% growth notched in the year through last September.

There’s considerable uncertainty associated with the forecast.

The Journal conducted the poll of 50 economists this week in lieu of the Commerce Department’s report on fourth-quarter gross domestic product, originally scheduled for Wednesday. The government postponed the release along with a bevy of other economic data in January because of the 35-day partial government shutdown that ended last Friday.

The upshot: Economists’ latest estimates rely on a lot of guesswork. “We are a bit blind in the first quarter,” Ms. Swonk said.

But this is clear:

The U.S. expansion is set to turn 10 years old this summer and thereafter become the longest on record.

And eventually expansions come to an end. Which is why many, including us, think it’s important to budget for long-term sustainability. Oddly, though, many states are tacking in the opposite direction, as the Wall Street Journal reports. Washington made it to the top of the story, which carries the headline, “Free Community College, Higher Teacher Pay: States Embark on Spending Sprees.”

After years of retrenchment, state spending is back.

Lawmakers in West Virginia are considering a 5% raise for state employees. California’s newly inaugurated governor has rolled out a spending plan that includes free community college. And Washington’s governor proposed $1.1 billion for orca recovery and salmon-habitat preservation, which he says would benefit the state’s ecosystem and improve water quality.

The report points out that many states have endured a long period of retrenching during and after the recession. Notably, as the Washington Research Council has reported, our state budget has grown dramatically in the last decade.

From the pre-recession peak in 2008 through 2019, spending from funds subject to theoutlook (NGFO) is budgeted to increase 43.9 percent. Washington’s state and localspending per capita has exceeded the national average in most years since 2000 and ranked 15th highest in 2016. From 2016 through 2021 (the end of the second biennium of the current four-year budget window), NGFO spending is projected to increase by 40.3 percent.

On top of that growth, the governor proposed an additional 22.3 percent increase in state spending and $3.7 billion in new and increased taxes. The Wall Street Journal summarizes the budget situation:

In Washington, officials project a 15% increase in tax revenue this budget, compared with the previous budget. They also estimate a 12% revenue increase for the coming budget beginning in July.

Democratic Gov. Jay Inslee has proposed enacting nearly $4 billion in tax increases to pay for new spending, including $1.2 billion for K-12 education and $262 million to combat homelessness.

But, the good times that made recent spending increases possible may be – almost surely are – coming to an end. Again, from the WSJ:

“The states are probably healthier now than generally at any point since the end of the Great Recession,” said Gabe Petek, a former managing director at S&P Global Ratings. “What looks good right now might be reflective of conditions that have already passed.”

This, then, is a time for fiscal discipline and caution, not an additional spending surge. Fortunately, Washington has solid budget sustainability requirements in place