The road back from the Great Recession has been a long and winding one, that’s for sure. Even when some economic indicators have given us hope, other factors (often the ones that matter most to workers) have lagged behind. For example, despite lower unemployment rates, wage growth has been slow. However, now that the first quarter of 2016 is well underway, there are some indications that the job market might truly be improving. Here’s what you need to know.
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When it comes to the Gross Domestic Product (GDP), there are really two numbers that are significant: 1. the real GDP, which represents the value of the goods and services produced by the U.S., and 2., the potential GDP, which shows what the economy is capable of supplying. When the GDP falls below the potential GDP, as it did during the recession, unemployment and wasted productivity are the result. Last month, Congressional Budget Office projections indicated that the gap will close over the next few years as the actual GDP will grow faster than the potential GDP.
2. The pace of job creation.
By mid-2014, the economy finally hit an important milestone: the recovery of all 8.7 million jobs lost during the recession. In January of 2016, nonfarm payroll employment was 3.5 percent higher than it had been at the start of the recession – but that doesn’t mean that the economic recovery is complete.
The Center on Budget and Policy Priorities explains:
“Surpassing the pre-recession peak was a milestone on the way to a full jobs recovery, but population growth over the past several years means the potential labor force is larger than it was then. Job creation has averaged 222,000 a month over the past 12 months. That pace is well above what’s required to bring down unemployment and will begin to slow as labor market health continues to improve.”
People don’t just quit their jobs when they’re unhappy with their boss or ready for a career change. Economic conditions have a pretty big influence as well. When folks don’t feel that they can trust that they’ll be able to find a new job, they are far less likely to voluntarily walk away from employment. The Labor Department reports that in December 2015, the number of voluntary quits rose to their highest level since 2006, about 3.1 million.
According to the Labor Department, the number of hires also rose to a post-recession record of nearly 5.4 million in December. Job openings in December (5.6 million, the second highest recorded) were also promising, and layoffs dropped to their lowest rate in a year.
Of course, it’s difficult to say if the job market will continue to trend in a positive direction. Some indications, such as recent fluctuations in the stock market, paint a less rosy picture of the current state of the U.S. economy. However, when all factors are taken into consideration, optimism seems justified.
“Despite the turmoil in financial markets and increasing talk of recession, the labor market continues to improve and is moving toward full employment,” Gus Faucher, senior economist with PNC Financial Services, told The Wall Street Journal. “Job openings and hiring are up, workers are leaving their jobs to find new ones, and layoffs are very low.”
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