U.S. Employment Surge Boosts Optimism

In November, a strong increase in payrolls and a steady unemployment rate indicate the U.S. may approach full employment in the near future.

The country added 211,000 non-farm payrolls in November, the Bureau of Labor Statistics said in a report. While this represents a decline from the 298,000 payrolls added in October, it brings the 4-month average to 269,250—a historically high number that may indicate unemployment rates will begin to fall in 2016.

In November, a strong increase in payrolls and a steady unemployment rate indicate the U.S. may approach full employment in the near future.

The country added 211,000 non-farm payrolls in November, the Bureau of Labor Statistics said in a report. While this represents a decline from the 298,000 payrolls added in October, it brings the 4-month average to 269,250—a historically high number that may indicate unemployment rates will begin to fall in 2016.

Currently, the unemployment rate remains steady and unchanged at 5 percent, but the total number of unemployed people in America has decreased by 14 percent since November last year.

Decline in Long-Term Unemployed

One of the strongest indicators of improvement in the labor market comes from a decline of long-term unemployment, which has fallen by 27.8 percent to 2 million people in November from a year ago. The total number of long-term unemployed has fallen precipitously over the last three years, but the decline in 2015 has proved markedly stronger than some economists have expected.

At the same time, the number of short-term unemployed individuals has seen smaller declines. Those unemployed fewer than five weeks have decreased 2.6 percent from a year ago—an organic decline that some economists suggest points to less slack in the labor market. Furthermore, those transitioning from five weeks or less of unemployment to more than five weeks have seen positive shifts as well.

This may suggest that, as people lose their jobs, they find it easier to secure new jobs than they have in recent years.

Trade Balance Concerns

The improvement in the labor market that has remained consistent over the last three years is at odds with a worsening trade balance as American exports continue to plummet on a stronger dollar and weaker foreign demand for goods and services.  Total exports in October fell by 1.4 percent over the prior month, driving the trade deficit to rise to $43.9 billion in October. That represents a 3.3 percent rise in the total deficit. In total, exports fell to $184.1 billion in October, while exports fell to $228 billion.

Many economists point to weak foreign currencies and the strong dollar as the driving factor in this trend, but also dismiss its impact on the U.S. market, as domestic demand drives most economic activity.

However, a recent decline in U.S. manufacturing activity, which actually began falling off in November, could indicate that American producers’ reliance on American consumers, whose real incomes have flat-lined for over a generation, may have overstretched. Furthermore, the growing deficit also may cast a shadow over expectations about how the Trans-Pacific Partnership free trade agreement, or TPP, will benefit American workers.