U.S. Employment Gains Drive Growth Expectations
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
A higher employment rate in the United States is encouraging more aggressive growth expectations from economists, while global growth expects to lag.
Economists are becoming more aggressive in their GDP targets, with several investment banks raising growth forecasts after the Commerce Department announced GDP growth rose to 5% in the United States in the third quarter of 2015.
A higher employment rate in the United States is encouraging more aggressive growth expectations from economists, while global growth expects to lag.
Economists are becoming more aggressive in their GDP targets, with several investment banks raising growth forecasts after the Commerce Department announced GDP growth rose to 5% in the United States in the third quarter of 2015.
Since then, unemployment rates have fallen and several estimates indicate job growth in the private sector is bolstering the U.S. labor market. Last week, payroll firm ADP announced that the private sector added 241,000 jobs. More recently, the Bureau of Labor Statistics announced that total nonfarm payrolls rose 252,000 in December, bringing unemployment to a post-2008 low.
Current unemployment rates are at their lowest point since 2005 and well within historic norms for the United States after World War 2. Since 1960, unemployment has stayed mostly between 3.5% at its lowest in the late 1960s, and 6% at its highest outside of recessionary periods.
Big Job Gains after High Losses
In total, the United States saw 2.95 million new jobs in 2014, the best year for job gains since 1999. Since 2010, when job growth went positive in the U.S., the country has seen 10.7 million new jobs added, after 8.6 million jobs were lost in 2008 and 2009.
While job gains have allowed the U.S. to erase the Great Recession’s tremendous job losses, population growth means the employment to population ratio has not recovered to pre-recession levels. While the ratio was 63% in 2006, which was itself lower than the 64.5% peak in 2000, the ratio has struggled to exceed 59% in recent months.
That low rate of total employment is the lowest the U.S. has seen since the early 1980s.
Moribund Wages
Despite the strong growth of jobs in the U.S. and higher demand throughout the economy, wages have not seen significant growth, and have trailed the rate of inflation. In December 2014, average hourly earnings fell 5 cents from the prior month to $24.57, which was 1.7% above December 2013’s hourly rate. Weekly earnings also fell month-over-month.
Economists have expected wage growth to accelerate, and a slight uptick in hourly earnings in November bolstered expectations for continued earnings growth in December. However, the BLS data suggests that wage growth is not necessarily following greater labor demand.
Service-sector wage growth slightly outpaced goods-producing wage growth, rising 1.7% versus 1.5%, respectively. Retail trade earnings were the lowest, and fell to $17.04 per hour. The highest earnings were in the utilities sector, which also fell 0.2% month-over-month to $25.86.
