Capping the best year for the job market since the recession began seven years ago, employers added 252,000 jobs in December, the Labor Department reported on Friday, and unemployment fell to 5.6 per cent. The US unemployment rate was last that low in June 2008.
The number of new people put on payrolls last month was above what economists had forecast, consistent with the view that recovery is finally gaining traction after years of only modest growth.
In addition, the number of jobs created in November was revised upward to 353,000, from 321,000. That month, the unemployment rate was 5.8 per cent.
“The economy has some momentum,” said Robert Shapiro, chairman of Sonecon, an economic consultant firm. “I think it’s kind of hit a stride with respect to job creation.”
Optimism over the wage gains of November, when average hourly earnings rose 0.4 per cent, was tempered by December’s results, which showed a decreased of 0.2 per cent. In a long recent stretch, earnings either fell short of or barely outpaced the inflation rate.
“Eventually a healthier labour market should translate into decent wage growth,” said Elise Gould, a senior economist for the Economic Policy Institute. “The question is, when will workers start seeing the decent economic news reflected in their paychecks?”
For now, 2015 is shaping up to be the year of the consumer, with benefits from lower prices for imported goods as well as falling oil prices, which are offering a windfall. One economist likened the lower prices to the equivalent of a decent pay raise of about $1,000 a person for the year, if prices stay low.
“There are tremendous tail winds for consumers,” said Mark Zandi, chief economist for Moody’s Analytics. “There’s nothing stopping them from spending more. There are more jobs, better wage growth, rising housing values - confidence is improving and now there’s a sharp decline in gasoline prices.”
The drop in oil prices represents a substantial transfer of income from oil producers to oil consumers, said Kevin Logan, a chief economist for HSBC Bank. US. oil producers have announced plans to shut dozens of rigs, though, and workers are expected to lose jobs. The economies in oil- and shale-producing regions like Louisiana and North Dakota might suffer.
“Every dollar gained is a dollar lost, but the benefits are widespread, and the losses are concentrated and will be small,” Mr Logan said.
Still, the US economy has not broken free from the lingering effects of the downturn, and experts saw several things to worry about for the coming year. Millions of workers are still looking for full-time employment, while even more have been so discouraged that they have either dropped out of the labour force or reluctantly accepted part-time work.
The share of men in their prime working years who are not working has more than tripled since the 1960s. While the share of the work force put out of work for a relatively short time has returned to historical levels, long-term unemployment remains highly elevated, and nearly a third of those have not been able to find a job for more than two years.
While the recent string of new economic data has been positive on the whole, “the downside is we’re still healing,” said Diane Swonk, chief economist for Mesirow Financial.
The strong dollar – at its highest point in years - is hailed by many as a sign of America’s improving economic conditions. But the dollar’s strength comes with consequences. US manufacturers abroad may lose their competitive edge with products that are now too expensive. Demand for US products could wane, and exports overall could suffer.
“People like a strong dollar because it means there’s faith in the United States, but it also undermines us,” Mr Swonk said. “You have to be careful what you wish for.”
Another potential threat for the United States is the overall weakness in the global economy. Europe’s economy is stagnant, China’s is slowing and Japan’s is struggling to emerge from a recent downturn.
“There’s a risk we could see slower job growth if much of the world goes into recession,” said David Berson, chief economist at Nationwide. “It’s unlikely, but there’s a chance.”
Federal Reserve officials noted the global economy’s weakness in a meeting this week, but they were generally optimistic about the state of the US economy. Still, there was concern the toll abroad could affect growth in the United States and a number of experts are urging it to move cautiously.
“It’s important that the good economic news doesn’t prompt the Federal Reserve to raise interest rates any time soon,” the Economic Policy Institute said. “Putting the brakes on the economy too soon could have a disastrous impact.”
– New York Times Service
