In the final weeks leading up to the U.S. presidential election, financial markets became a bit skittish as investors reacted to an unexpectedly narrow race in the homestretch, and a lot more uncertainty toward the finish. What was certain during this time, however, was that track conditions for jobseekers remained good, as the latest reports revealed both the overall U.S. economy and job market holding up strong underfoot.
A few spots of soft turf also turned up, as the growth rate for economic expansion and job creation both showed signs of slowing slightly, but not so much that jobseekers should feel any less confident in getting in on the job market action.
More payouts and parlaying winnings
The best news for jobseekers is that wage growth is finally increasing after seven years of being flat on its back, growing at its highest rate since mid-2009 (Figure 1). Dampened wage growth tends to be one of the longest lingering blemishes left by a recession. As such, the reported annual increase of 2.8 percent over last year represents money flowing into workers paychecks that is starting to look real, especially in higher paying sectors where the fastest jobs growth is occurring.
Anecdotal evidence and Labor Department data both reveal an encouraging trend: jobseekers of nearly all skill levels are pursuing higher paying opportunities and trading up successfully, indicating a level of job churn consistent with a robust job market (Figure 2). Employers have yet to see substantial effects of workers demanding higher wages, as employment costs continued to rise only moderately.
Figure 1: The bottom fell out of wage growth in mid 2009, and remained flat until 2016, when solid annual increases were finally observed in the second and third quarter, enough so to establish a trend of increasing wage growth. Annual wage growth still has not quite recovered to pre-recession levels, but did approach its highest level since early 2009. Note: the Great Recession took place from December 2007 through June 2009.
Figure 2: Voluntary quits have now returned to pre-recession levels, representing 12.1 percent of all separations, as workers seek out better job opportunities as they become increasingly available. Note: the Great Recession took place from December 2007 through June 2009.
Resilient market, resilient workers
Some mixed news came with the unemployment rate. While the overall figure fell slightly to 4.9 percent, the reasons for the decrease do not tell a consistently positive story. On one hand, the economy continues to create jobs at a rate of about 160-180,000 per month, an amount that exceeded economists’ predictions and necessitated the BLS revising the numbers it reported the previous month. On the other, the job market’s ability to absorb new hires softened, as the total number of hires decreased slightly to 5.08 million, or 3.5 percent of the total job market. Labor market participation also remained stubbornly low, decreasing slightly to 62.8 percent.
Nevertheless, the combination of accelerating wages and jobs growth is likely to pull sidelined workers back into the labor force in 2017, something that both the long-term unemployed and policymakers would welcome warmly.
But at the moment, prime age (24-54 years) workers are benefiting most from jobs and wage growth, a reassuring indication that the overall economy also has more room for growth.
Leading up to Election Day, initial claims for unemployment benefits rose slightly to a three-month high of 265,000 before receding to 254,000, still well below the threshold of 300,000 that commonly demarcates a strong job market (Figure 3). Candidates and pundits alike were quick to point out that the U.S. economy is approaching its 90th consecutive week where the figure has been below 300,000.
No less impressive, though much less quoted, is the continuing unemployment claims figure, which decreased slightly to 2.04 million, the lowest level since June 2000. Both figures coincided with a record low layoff rate announced on Election Day. Overall, layoffs are becoming less frequent, shorter in duration, and less likely to lead to dropping out of the labor market.
Figure 3: Steady trend of decreasing layoffs and a strengthening job market. Note: the Great Recession took place between December 2007 from June 2009.
Shopping early and often
The steady but modest economic growth of 2016 has resulted in a tight job market. And nowhere is this clearer than holiday hiring by retailers. Shoppers have more money to spend, more places to spend it, and a longer season to do so. Workers are needed to stock and sell, but increasingly more are needed to package and deliver.
Consequently, retailers are actually competing with themselves to staff up and meet customer demand at both their physical and online locations. While retailers expect to hire about the same number of seasonal workers as last year, their solution was to hire much earlier in order to tap a smaller pool of workers.
Looking out for the fast track
Good track conditions are certain to continue through Inauguration Day, with a possibility of some of the soft turf firming up, almost to the point of fast track conditions. The best bets you make in 2017 may be the ones you make on yourself.