American hiring surged in November marking 2014 as the healthiest year for job growth since 1999.
With 321,000 new jobs the US is now showing signs that its job market is much more robust compared to other nations in the developed world.
The job market is certainly not perfect though, however, if this steady improvement continues it is likely that the US Federal Reserve will raise rates from near zero by mid-2015.
On Friday the Labor Department said that the unemployment rate is at a six year low of 5.8 percent.
Mark Zandi, chief economist at Moody’s Analytics, said:
“These were boom-like numbers. They indicate that the U.S. economy is on very solid ground.”
The report also indicates that wage growth could be on the right track too. Since the Great Recession the average hourly wage has been somewhat stagnant, but the average wage increased by 9 cents in November to $24.66, the largest increase in 17 months.
According to Janet Yellen, Chairman of the Fed, stagnant wages has been one of the main reasons of keeping rates low. As wages rise so will prices of goods, and the Fed may have to raise rates to prevent inflation.
The reason why the Fed has kept rates so low is because it wants to promote borrowing and spending in the market.
Over the past year hourly pay has only increased by 2.1 percent, just ahead of the 1.7 percent inflation rate. Economists say that inflation is still below that Fed’s target inflation rate of 2 percent and low energy prices will likely keep this rate down, giving the Fed some more time before increasing rates.
So far in 2014 the number of new jobs stands at 2.65 million jobs and there is still one month to go before full year figures are released.
Investors responded well to the news. Following the report on Friday the Dow Jones industrial average increased by 58 points, closing at 17,958. In addition, the yield on the 10-year Treasury note rose to 2.31 percent, from 2.25 percent.
There are still signs of weakness in the job market though
The country still has 6.9 million people who work part-time but would prefer full-time work. Before the recession this figure was only at 4.1 million.
In addition, a broader measure of unemployment, including involuntary part-time workers and people who given up looking, is still very high at 11.4 percent.
People who have been unemployed for over six months stands at 2.8 million, double the level before the recession.
“At this rate, we won’t return to pre-recession labor market health until October 2016 — nearly nine years since the recession began,” said Elise Gould, an economist at the liberal Economic Policy Institute.
A large number of Americans continue to be anxious about the economy. According to a Gallup poll conducted last month, 30 percent of Americans said that the economy was in “poor” shape, compared to only 24 percent who said it was “good” or “excellent”.
Interestingly, Americans earning over $90,000 have a much brighter outlook than those who earn less.
Seasonal hiring was strong this year. Retailers added 50,300 jobs and transportation and warehousing added 16,700 jobs.
UPS expects to hire 95,000 seasonal employees, compared to 85,000 last year. FedEx is going to hire 50,000, compared to 40,000 last year.
US job market strong despite global weakness
If you compare the US job market to those of other advanced economies the country is performing extremely well. Compared to growth in the Eurozone the US is well ahead. EU unemployment is currently at 11.5 percent.
Other major markets, including China, Russia, and Brazil are struggling to grow.
This is partly because the US is not as dependent on exports compared to countries such as China, Japan, and Germany. The US relies more on its domestic market and American consumers.