Heralding an upbeat holiday season, the Department of Labor announced Friday that the U.S. economy added 211,000 new jobs in November, while the nation’s unemployment rate held steady at a seven-year “full employment” low of 5%.

The November job increases, plus an upward revision in the October figure to 298,000, mean an average monthly gain of 237,000 jobs in 2015, for a total of more than 2.3 million new jobs this year alone.  

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December Jobs Report: Happy Holidays!

Fri Dec 4, 2015

Heralding an upbeat holiday season, the Department of Labor announced Friday that the U.S. economy added 211,000 new jobs in November, while the nation’s unemployment rate held steady at a seven-year “full employment” low of 5%.

The November job increases, plus an upward revision in the October figure to 298,000, mean an average monthly gain of 237,000 jobs in 2015, for a total of more than 2.3 million new jobs this year alone.

The good news on job creation comes on the heels of generally positive statements from economists, including Federal Reserve Chair Janet Yellen, who told the Economic Club of Washington DC this week, “I think the economy is on the road to recovery and doing well.”

On wages, a sore point in past employment reports, the Labor Department also signaled brighter times ahead. Average hourly earnings have risen 2.3 percent over the year, confirming that the tightening job market seems at last to be translating into higher wages. 

All this happy holiday news did come with one big piece of coal in the economy’s Christmas stocking: weak productivity growth.

The Labor Department reported this week that while U.S. productivity (a measure of changes in goods and services produced per hour worked) grew at an annual rate of 2.2% in the third quarter, the year-over-year productivity growth rate was only 0.6%, and this after annual growth rates of zero in 2013 and a meager 0.7% in 2014.

As the wellspring of growth in the overall economy, real wages and living standards, robust productivity growth is the one essential barometer of economic health. It seems clear that in recent years this key indicator has stalled, as evidenced by the Labor Department chart below.

Productivity Change

From 2007-2014 productivity growth has averaged 1.3% per year, exactly half the growth rate of the period 2000-2007 and well below the rate for 1990-2000.

A nation’s productivity growth rate is understood to be a kind of “speed limit,” essentially defining that economy’s overall potential growth rate.  In this sense, a longer term slowdown in the rate of productivity growth could translate into a longer term slowdown in GDP growth, no doubt contributing to stagnant wages and persistent income inequality. 

Ominously, economists at J.P. Morgan recently concluded that the outlook for U.S. productivity growth was not bright. “A downward trajectory in underlying productivity growth will remain in place and our estimate of U.S. potential [growth] has fallen to 1.5%-1.75%.”

So what’s more important? Good jobs news or gloomy productivity prospects? Federal Reserve Board members meeting in Washington DC this month will look at all the recent economic data and probably raise interest rates for the first time in a decade—a sign of confidence in the U.S. economy.  Whether economists celebrate Christmas, Hanukkah or Kwanzaa, this holiday season most will focus on a 5% unemployment rate and 2.3 million new jobs in 2015 and say “Happy Holidays”!