U.S. Unemployment Rate Hits New Low
By Unemployment-Extension.org | January 22, 2015 at 10:42 PM |
The U.S. unemployment rate has fallen to 5.6 percent, the lowest rate since 2008. The drop can be attributed to healthy hiring in the tail end of 2014.
A recent report from the Labor Department released in early January showed that employers added an impressive 252,000 jobs in December 2014. In total, nearly 3 million jobs were added to the U.S. economy in 2014, and unemployment fell by 1.1 percent, making 2014 the best year for job growth since 1999. Job growth is expected to continue, an indication that businesses are more confident than ever since the Great Recession.
“Last year was a truly breakout year for the labor market,†James Marple, an economist at TD Securities, explained. “Businesses are increasingly looking to hire.â€
Economists forecast that growth will continue, with many predicting that the U.S. economy will expand by more than 3 percent in 2015. The U.S. is situated to continue powering ahead of other large economies, notably those of Europe, which are still struggling in the aftermath of global recession, facing unemployment rates that are double those of the U.S., and an economic growth rate of virtually zero.
The U.S. is also outperforming China, which is currently struggling in the wake of an economic slowdown, as well as major Latin American economies, such as Brazil. Even the Russian economy is tanking as oil prices continue to plummet.
Gains in Employment; Weakness in Paychecks
In spite of gains in employment and robust hiring practices, weaknesses in paychecks persist. In 1999, workers saw 3.6 percent gains in pay, a rate fairly typical of an economy experiencing strong economic growth.
Last year, gains were a meager 1.7 percent. Wages have barely kept pace with inflation in the 5½ years since the Great Recession, and average hourly pay actually fell in December. While hourly wages were at $24.62 in November, they fell to $24.57 in December.
Increased hiring rates coupled with declining unemployment should, in theory, drive up wages, as companies are forced to hike up salaries in order to attract workers. However, these increases have yet to materialize.
U.S. Labor Secretary Thomas Perez hailed job growth as very positive, but argued that more still must be done to boost wages. “The challenge is undeniably the unfinished business of this recovery, which is to ensure the prosperity we see is shared prosperity and the contributions that workers make to productivity result in real wage growth,†he explained.
The Persistent Problem of Long-Term Unemployment
Still, a necessary caveat to the positive news of the falling unemployment rate is the issue of long-term unemployment. Economists have pointed out that part of the reason for the drop is that many of those who have been out of work long term have given up on looking and no longer count as unemployed.
Furthermore, the Brooking Institute estimated that in order to keep up with population growth, the U.S. would need to create some 4.9 million additional jobs annually in order to maintain current unemployment rates.
Still, there are signs of improvement: The number of individuals unemployed for 6 months or longer fell by 27 percent last year, and the number of people working part-time who would rather be working full time fell by 12 percent.
In addition, falling oil and gas prices will likely provide additional stimulus to the economy, enhancing consumers’ spending power. Goldman Sachs estimated that this additional consumer spending powered by falling oil and gas prices will create some additional 300,000 jobs this year.
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