COMMENTARY
The U.S. economic expansion is setting records right and left. What began as a “jobless recovery” is now making history for its duration, and, without a major shock, there’s no obvious end in sight. The recovery wasn’t impressive at the outset, but slow and steady is winning.
The current U.S. economic expansion now ranks in a tie for the second longest in history (with the Kennedy-Johnson period of the 1960s). The recovery dates back to June 2009 according to the National Bureau of Economic Research (NBER), the official arbiter of business cycle turns.
The only one longer was the “Clinton expansion” during the 1990s, the latter part of which was fueled by the emergence of the internet and all that it enabled. Moreover, the number of consecutive months of job gains is the longest ever as of April.
Total nonfarm payroll employment increased by 164,000 in April, has averaged 208,000 over the past three months and 205,000 in 2017, only modestly behind the average pace since 2010.
Unemployment is the lowest it has been in decades. In April, the unemployment rate cracked the 4 percent barrier, dropping to 3.9 percent after six months at 4.1 percent.
The economy needs a little slack in the workforce to operate efficiently, and the current level is below the usual definition of “full employment.” Workers on the sidelines are being enticed back into the workforce, but there are limits to that. The number of initial claims for unemployment is at levels not seen in half a century.
The number of job openings (6.6 million) is higher than it’s been since tracking them began in December 2000. Also, the number of “quits” – generally voluntary separations initiated by the employee – have been over 3 million for months and increased to 3.3 million in March.
Quits are considered a good sign in that they signal workers’ willingness or ability to leave jobs. When jobs are scarce, the number of voluntary quits tends to be low; the current level indicates people are finding preferable positions elsewhere.
There is still room for continued growth. The slow and steady nature of the current expansion has helped to keep the economy from overheating. Inflation has remained under control, and the Federal Reserve has been able to keep target interest rates low for an extended period of time.
Some increases are expected this year, but the longer inflation remains under control, the further out (and smaller) they will be.
One negative statistic in the jobs market has been the sluggish growth in wages.
However, it’s only a matter of time. With millions of job openings and low unemployment, the inevitable outcome is that compensation rises and workers benefit.
Stay tuned.
M. Ray Perryman is president and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.