After five long years, the U.S. labour market is back where it was on the eve of the Great Recession.
Employers added 217,000 jobs in May, bringing the working population to 138.46-million, topping the previous peak of 138.37-million in January, 2008, the Labor Department reported Friday.
The milestone was greeted with little cheer, as the jobs recovery was by the far the longest since the end of the Second World War. Fifty-one months passed from when net hiring turned positive in early 2010, twice as long as the “jobless recovery” from the downturn in the 2000s. The White House didn’t include the new high-water mark for employment among its “five key points” in the Labor Department’s latest survey.
According to the National Bureau of Economic Research, the non-profit group that dates business cycles, the recession triggered by the 2008 financial crisis began in June, 2009, and ended in September, 2010. The recovery was rarely better than plodding, as the economy rarely reached the velocity necessary to put millions of people back to work quickly. The Federal Reserve orchestrated an extraordinary stimulus program to keep the recovery from backsliding.
“The labour market recovery has been disappointing,” said Gus Faucher, a senior economist at Pittsburgh-based PNC Financial Services Group Inc. “Even with the new peak there is still a great deal of slack in the labour market as the U.S. working-age population has steadily increased.”
The good news Friday was that the U.S. economy appears to have achieved a steady forward march, generating more than 200,000 jobs for four consecutive months for the first time since the end of the 1990s. The unemployment rate, which is based on a separate survey of households, held at 6.3 per cent, the lowest since 6.1 per cent in September 2008.
Both results – the payrolls increase and the steady unemployment rate – generally were in line with what most Wall Street analysts had predicted, making the report one of the first in recent months that held few surprises. Exceptionally frigid and snowy weather through the winter months knocked the U.S. economy off track, producing startling weak hiring numbers. Last month brought a surge in jobs as the economy got back on track. The Labor Department revised the April figure slightly, dropping it to 282,000 from the 288,000 it first reported.
Consistently good, if not great, labour-market readings will keep the U.S. Federal Reserve on track to complete its bond-buying program this autumn, but likely won’t alter plans to leave the benchmark lending rate near zero until well into 2015.
Another solid employment report also will raise questions about the Bank of Canada’s observation this week that the U.S. could be losing momentum. Friday’s numbers suggest the world’s largest economy is at least as strong as it was earlier this year. Payrolls are increasing faster than the 12-month moving average of 198,000, “consistent with the story of increased economic momentum,” said James Marple, a senior economist at Toronto-Dominion Bank in Toronto.
Canada’s central bank on Wednesday said it decided to leave its benchmark interest rate unchanged this month in part because “there could be slightly less underlying momentum” in the U.S. economy. This week’s data suggest otherwise, as gauges of factory and non-manufacturing production increased, and automobile sales surged. Stock markets in New York rose to new records Friday.
“In general, the evolution of the labour market has been consistent with our view that the economy is expanding above its long-term potential,” economists at Deutsche Bank in New York said in a report for clients.
While the current momentum heralds a better future, labour-market conditions in the present remain far from ideal.
There are only about 4,000 more people working today than a year ago, even though the population of working-aged people has increased by about 2.3-million. The reason is some combination of Baby Boomers choosing retirement and slack demand for workers. The result is a labour-force participation rate of 62.8 per cent, the lowest in more than three decades.
The Fed is watching the participation rate and other granular aspects of the monthly jobs data to inform its policy decisions. Average hourly earnings rose only 2.1 per cent from a year ago, not much faster than inflation, and the number of Americans unemployed for longer than 27 weeks – a figure Fed chair Janet Yellen has made clear she want to lower – was little changed at 3.4-million, or about 35 per cent of the unemployed.