What Are The ‘Normal’ Rates of Job Growth in the Employment Market?

To better understand the latest March report and whether or not it constitutes an unemployment extension news update, we must first determine what the regular rates of new employment are supposed to look like. Before this March drop, the rate at which the U.S. economy created employment was of 200,000 new jobs each month as mentioned above. This wasn’t considered an average value or a basic rate but was in fact quite high. Economist have not seen this level of new jobs creation since a 13 consecutive month period back in 1994-1995. Thus, the levels of new employment before March weren’t exactly average to begin with. Instead, economists interpreted these signs as spectacular economic growth. After the recent financial crisis, it was exactly the good news everyone waited for.

Moreover, examining other figures besides the employment growth can prove relevant as well. These additional figures can prove that this boost wasn’t meant to last for too long. First of all, the overall unemployment rate had hovered around the 5.5 percent. According to the economists’ predictions, it was supposed to remain constant. And, indeed it did. Even if they got carried away by the predicted employment growth, they were still right about this. A while back, Federal Reserve (FD) representatives stated that if the unemployment rate reached this level of 5.5 percent, they would consider raising the interest rates again. Their rationale was that this raise would show a surefire sign of a healthy economy. According to the economist John Canally from LPL Financial, the FD has since reconsidered this position deciding that the economy still isn’t actually as strong as they originally hoped.

One of the reasons they reconsidered raising rates is due to the inflation level which currently sits at 2%. Although we generally hear about the inflation rates, a level of 2% actually sits lower than what a healthy economy should normally display in the FD’s view according to Canally. Our market currently hasn’t experienced much wage inflation which means that all of the new jobs have yet to help increase our wages (which would provide the welcome sign the FD is searching for). During the recent economic recovery, wage growth has been very slow at about half of its normal and previous rate. The reality is that wage growth has shown a very different story compared to the recent strong job growth.

How Disappointing Should the March Employment Report Really Be for Employment News?

The fact that the wage growth was so slow during these past months means that employers aren’t competing very hard to attract new workers, and this is a sure-fire sign that they understand the state of the economy quite well. This state is one in which there are many, many people still looking for jobs, and the current 5.5 rate of unemployment is just the beginning of the story. Low labor force participation figures also indicate that many people still remain on the sidelines of the economy, and there are also 6.5 million people who are theoretically among the employed, but who are in fact part-time workers seeking to find full-time jobs at some point.

What we should understand from all these recent announcements is that the state of the economy and the U.S. job market was really not very rosy to begin with. Although the employment growth rate prior to March is indeed good news, we shouldn’t have gotten our hopes up. This news shouldn’t have spurred such high hopes considering the recent economic downturns we just bounced back from. The drops indicated in the recently released March data aren’t actually that surprising if you  consider the overall job market and how much more growth we must still undergo.