In what was clearly the best jobs news in years, the Department of Labor announced last week that the U.S. economy created a whopping 271,000 new jobs in October, the biggest one month gain this year.

The revving American jobs engine pushed the nation’s unemployment rate down to 5%, the lowest it’s been in 7 ½ years. While economists bicker over exactly what constitutes the “full employment” unemployment rate—4.5, 4.75 or 5.0—for all practical purposes the U.S. is now at full employment.  

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Jobs Report: Full Employment at Last!

Tue Nov 10, 2015

In what was clearly the best jobs news in years, the Department of Labor announced last week that the U.S. economy created a whopping 271,000 new jobs in October, the biggest one month gain this year.

The revving American jobs engine pushed the nation’s unemployment rate down to 5%, the lowest it’s been in 7 ½ years. While economists bicker over exactly what constitutes the “full employment” unemployment rate—4.5, 4.75 or 5.0—for all practical purposes the U.S. is now at full employment.

For perspective, the unemployment rate now is exactly half what it was in October 2009, when it tolled 10% as the recession tightened its grip on the U.S. job market.

Since the Great Recession ended in June 2009 the economy has created almost 12 million new jobs, almost 2 million this year alone, an extraordinary performance for any era and the envy of global competitors.

Even wages, which have been stuck in neutral since the recession, began to perk up in October. Average hourly earnings rose 2½%, suggesting that a tightening labor market is finally beginning to translate into higher wages.

This great jobs news has three obvious implications:

Number OneThe Federal Reserve is now almost certain to jack up interest rates at its December meeting. After holding rates near zero since 2008, and finding new reasons not to raise rates, such as a weakening Chinese economy, the Fed cannot ignore the inflation potential of a 5% unemployment rate. Monday’s stock market drop indicates that traders now believe the Fed is getting ready to take away the punch bowl, as the saying goes. The long downward trajectory of rates is over and stocks, which have been held aloft for years by easy money, might take a hit.

Number TwoThe skilled worker shortages are about to become a big deal for employers. Attracting, retaining and motivating employees, already a priority for most organizations, will soon become the #1 priority for increasing productivity and competitiveness. Enhancing employee health and engagement, including a focus on achieving work-life balance, will become more important in this tightening job market.

ceridian-number-three.pngThe U.S. job market is once again exhibiting the “snap, crackle and pop” dynamism so characteristic of an innovative economy. A healthy job market creates new options for employers and employees, especially to manage human resources in real time. In a dynamic labor market environment organizations will increasingly turn to state-of-the-art human capital management to maximize productivity and improve talent management. 

Politicians on both sides of the aisle will find something to complain about in last week’s jobs numbers. Some will remind us of persistent income inequality amid soaring stock market wealth. Others will say it’s taken far too long for the economy to return to full employment.

Be that as it may, there’s no mistaking the key message in last week’s jobs report: full employment is back at last.