The US service sector is in the midst of a significant transformation as a convergence of factors is increasing the adaption of new technologies across industries. This is most visible in the retail sector, but I expect bars and restaurants, health administration and the financial sector to also increase the focus on efficiency gains. Wage pressure (partly from higher minimum wages) and less available labor are the main reasons, but an improved business outlook and higher after-tax profits create further incentives.

 

As a result, I expect job creation in the service sector to slow in 2018, while manufacturing and construction are likely to see more solid gains. This would boost productivity growth quite considerably, but not add a lot to wage increases. I expect a small positive effect from tax cuts on the supply of labor, but this is an uncertain assumption. Federal Reserve is likely to proceed with four interest rate hikes in 2018.

 

Report:

US service industry jobs

 

Related reports:

US growth outlook after tax cuts