How was the job market in 2016? With the final employment numbers of 2016 now in, it’s time to award medals to various components of the labor market. BRONZE: Job creation
The Labor Department reported that the economy created 156,000 jobs in December, bringing 2016 total job creation to 2.2 million. Sure, that’s not as good as 2014 (3 million) or 2015 (2.7 million), but with the economic recovery beginning its 91st month, a pace of 180,000 jobs per month is still solid.
SILVER: Long Term Unemployment
The unemployment rate ticked up from the nine-year low of 4.6 percent in November to 4.7 percent December, as 184,000 more people joined the labor force. For 2016, the unemployment rate remained in a tight range of 4.6 to 5 percent. BUT, the broader measure of unemployment (U-6), which includes part-timers who can’t find full-time work and discouraged jobseekers, who have given up looking for work, edged down to 9.2 percent, the lowest since April 2008 and down from 9.9 percent a year earlier. That progress earns the broad unemployment rate the silver medal, though it still remains above the 8.5 percent average seen in the three years before the recession.
GOLD: Wage growth
Average hourly earnings increased by 2.9 percent in December from the previous year, the strongest annual reading since June 2009, which happens to the be the month the recession officially ended. This result jibes with the Federal Reserve’s recent comment in its Minutes from the December policy meeting. Officials noted that labor market conditions “had tightened further.” With wage growth climbing again, the Fed is on track to tighten monetary policy this year.
One wonky note on wages: Bill McBride at Calculated Risk points out that in addition to the BLS, the Atlanta Fed Wage Tracker offers another way to measure year-over-year changes in nominal (not inflation adjusted) wages. This alternative calculation follows changes for individuals, which removes the demographic composition effects (older workers who are retiring tend to be higher paid, and younger workers just entering the workforce tend to be lower paid).” After removing the demographic impact, the Atlanta Fed measure shows nominal wages are increasing close to 4 percent!
Good progress, but no medals on these employment metrics:
- Long-term unemployed (those jobless for 27 weeks or more): For the year, this number declined by 263,000 to 1.8 million
- The labor force participation rate: Yes, the rate of 62.7 percent was unchanged over the year, but the labor force increased by about 1.7 million in 2016