There are still many pain points in the economy, but the pace of job growth is no longer one of them.
Employers added an impressive 321,000 jobs in November, far surpassing economists' expectations. The unemployment rate remained at 5.8%, which means more unemployed people stepped off the sidelines and started looking for work. The boost in employment is the biggest monthly gain in nearly three years.
Recent analysis of the job market has focused, correctly, on problems such as stagnant wages and a declining portion of adults in the labor force. Yet the underlying pace of job creation has strengthened to healthy levels, which suggests other important parts of the economy such as incomes, spending and home sales will soon begin to recover faster, too.
These numbers tell the basic story:
A few important trends emerge from these figures. First, the pace of job growth in 2014 has been the best since 1999, which was a boom (and arguably bubble) year for the economy. Job growth has exceeded the current pace during only four years since 1990. And the job-market recovery since 2009 is apparent in the usual way we expect to see, with five straight years of improving job growth, beginning in 2010.
The numbers also show why the economy is still in a funk. Job losses in 2008 and 2009 were so severe that it took five years just to recover the jobs that were lost. Recoveries happened much faster after the recessions in 1991 and 2001. The halting pace of recovery this time around means we’re not seeing a real rebound in hiring until years later than we’re accustomed to seeing. And even though job growth is now close to 1999 levels, part of the improvement is explained by a larger economy and a bigger population.
The quality of jobs in the current recovery is also suspect, which helps explain why incomes are stagnant. Research by the U.S. Conference of Mayors shows that jobs lost during the recession paid about $62,000 per year, on average. Jobs added since then only pay about $47,000. That's because employment in relatively high-paying fields such as construction and manufacturing are still depressed, while many of the new jobs that have materialized are lower-paying service positions in fields such as retail, hospitality and healthcare. In many families, the main breadwinner used to be a manufacturing or construction worker, but is now a retail clerk or office assistant. The jobs are there but household earning power is greatly diminished.
It could take years more for that pay gap to narrow, since employers and workers are both in the midst of a long period of adjusting to the new skills needed in the economy. In addition to hordes of technical experts and other specialists, U.S. companies need a lot of “middle-skill” workers able to think on their feet, manage others effectively and learn new skills as the economy changes. They’re having trouble finding them, with 56% of firms telling Accenture recently that they struggle to fill such openings. The fact that 3 million Americans have been unemployed for more than six months, and another 7 million work less than they want to, suggests an unprecedented mismatch between what companies need and what workers have to offer.
With the overall job numbers looking good, economists have been focusing more on wage data that’s part of the monthly employment report. The latest numbers show a slight increase in hourly wages, which are up about 2.1% during the last 12 months. But that's still barely better than the rate of inflation, which means ordinary people are struggling to get ahead. At the same time, the typical household has lost about 40% of its net worth since 2007, largely because of declines in home values, which are still far below pre-recession levels. These are all problems that basically didn’t exist in 1999, which is why strong job growth then felt a lot better than it does now.
A recovery has to start somewhere though, and before good jobs return, lesser ones have to suffice. Maybe we finally have enough of those.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.