While some recent reports have raised questions about the health of the nation’s economy, the latest one shows unemployment has fallen to its lowest level in eight years.
While some recent reports have raised questions about the health of the nation’s economy, the latest one shows unemployment has fallen to its lowest level in eight years..
The Labor Department said Friday that non-farm payrolls in January increased by 151,000, pushing the unemployment rate down to 4.9% from 5% in December. It's the first time it has been below 5% since February 2008.
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Since the start of 2010, there have been nearly 14 million jobs gains, according to the New York Times.
Job additions occurred in several industries, led by retail trade, food services and drinking places, health care, and manufacturing, according to the department. Employment declined in private educational services, transportation and warehousing, and mining.
Manufacturing added 29,000 jobs in January, following little employment change in 2015, bolstering hopes that recent business declines in the sector are easing. Chad Moutray, National Association of Manufacturers chief economist, said in the association's blog that this news “provides a bit of encouragement for manufacturers that have been beleaguered by the global slowdown and pullbacks in the energy sector.”
In for-hire trucking, 1,500 jobs were added in January. The wider transportation and warehousing sector saw a decline of 20,300, most of this occurring among couriers and messengers.
The overall report also showed wages increasing 2.5% over the past year, far ahead the rate of retail price inflation, which clocked in at a 0.7% increase in 2015.
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But not so fast...
If there is one concern with the report on employment, it is the pace of job additions last month was down from the previous three months, when the number was between 262,000 and 295,000.
"The rate for the unemployed, the underemployed and the discouraged remains stubbornly above prerecession levels."
In addition, some critics say the picture isn’t a rosy at it appears, because the unemployment rate does not include those who are marginally attached to the labor force and those with part time jobs, according to CNBC. On its website, data journalist Nicholas Wells points out that if you dig deeper into the employment numbers, "the rate for the unemployed, the underemployed and the discouraged remains stubbornly above prerecession levels."
When this is taken into account, the unemployment rate is 9.9%, but that's down 1.4 percentage points over the past year.
Regardless of whether you view the 4.9% or the 9.9% unemployment rate as truly being representative of the labor market, expect the pace of job additions to be around its current level in the coming months, according to Laura Cooper, economist with RBC Economics.
“The pace of gains over the past two years will become increasingly unsustainable, reflecting a slower rate of increase in the supply of labor coinciding with much of the excess slack in the labor markets being absorbed,” she said. “Nonetheless, ongoing employment gains, more in line with today’s report, are still expected to result in the degree of labor market tightness intensifying further, resulting in an upward trend in wage growth becoming more firmly entrenched.”
However, Cooper believes the persistence of solid job gains (albeit lower than last year), a further drift lower in the unemployment rate, and upward wage pressures will be enough to keep the U.S. Federal Reserve in tightening mode through the forecast horizon, barring further deterioration in financial markets and the global economic backdrop.
“Today’s reported slowing in job growth does not alter our forecast that assumes that the Fed funds target will increase by 100 basis points (1%) through 2016 from its current 0.25% to 0.5% level,” she said.
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