The government announced January 9 that the U.S. economy added 252,000 new jobs in December, bringing 2014’s total new jobs to just under 3 million, the best in 15 years.

The December unemployment rate came in at 5.6%, much lower than the 7% just a year ago and the lowest U.S. unemployment rate posted since June 2008. Last month’s unemployment rate was dramatically improved over the 10% unemployment rate hit at the recession bottom in October 2009.  

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2.9 Million New Jobs in 2014: Goldilocks Economy?

Fri Jan 9, 2015

The government announced January 9 that the U.S. economy added 252,000 new jobs in December, bringing 2014’s total new jobs to just under 3 million, the best in 15 years.

The December unemployment rate came in at 5.6%, much lower than the 7% just a year ago and the lowest U.S. unemployment rate posted since June 2008. Last month’s unemployment rate was dramatically improved over the 10% unemployment rate hit at the recession bottom in October 2009.

The Bureau of Labor Statistics estimates that 8.6 million Americans were unemployed in December, but this represents a big improvement over the recession peak of 15 million unemployed five years ago. To be sure, over 6 million people counted as employed are considered “involuntarily part-time” and would prefer full-time jobs. 

Significantly, the government said that 140 million Americans were working in December 2014, meaning that the U.S. economy has now recovered all the jobs lost during the 2008 financial crisis.

The good jobs data also extended to wages, essentially stagnant since the recession. While a slight downtick was recorded in December, average hourly and weekly earnings were up nearly 2% for the full year. It’s an encouraging sign that job gains are beginning to translate into better wage growth.

The latest jobs report confirms that the economy, which had been crippled by severe recession and in danger of stalling out since, began to gain velocity in 2014. Strong GDP growth, accelerating job gains, and a pick-up in wages all suggest that the U.S. has recovered from the deep downturn.

Implications for 2015—

In the “New Normal” economy shaped by the Great Recession of 2008-2009, Americans have learned not to take anything for granted. While the 2015 table seems set for strong growth, rising wages and job gains, concerns remain that economic weakness in Europe and elsewhere could ultimately wash onto U.S. shores. Put another way, the U.S. economy is healthy but susceptible to infection.

U.S. employers enter 2015 with expectations that the Federal Reserve has engineered a reliable and patient monetary policy, that Congress and the President will manage fiscal policy responsibly and that, with tightening labor markets, wages will need to rise to attract and retain workers, more broadly distributing the benefits of expansion.

America’s present economic situation, with robust economic growth, solid job gains, low interest rates and little inflation, could be called a “Goldilocks Economy”—not too hot, not too cold; indeed just right. Let’s hope it’s not just a fairy tale.