So much for secular stagnation.
In the wake of November’s surge in employment and stronger wages, even skeptics of the U.S. economic recovery are turning into optimists.
The 321,000 advance in payrolls followed a 243,000 increase in October that was stronger than previously reported, Labor Department figures showed Friday. It marked the 10th straight month that employment has increased by at least 200,000, the longest stretch since the 19 months that ended in March 1995. The jobless rate held at a six-year low of 5.8 percent, and earnings rose by the most since June of last year.
In his weekly address, President Barack Obama said Saturday that the job gains aren’t a “fluke” and they are found in high-wage industries.
“Overall wages are on the rise, and that’s some very welcome news for millions of hardworking Americans,” Obama said. “Because even though corporate profits and the stock market have hit all-time highs, the typical family isn’t bringing home more than they did 15 years ago. And that still has to change. And a vibrant jobs market gives us the opportunity to keep up this progress and begin to undo that decades-long middle-class squeeze.”
From factories to offices and retailers, employers took on more staff last month, giving American consumers the bump in pay needed to drive holiday spending. Economists including former U.S. Treasury official Brad DeLong, Nobel Prize winner Paul Krugman and Stephen Stanley of Amherst Pierpont Securities say the hiring surge shows the outlook has finally improved.
It was “the first good monthly report of the recovery,” DeLong wrote Friday on his blog and in a Twitter post. That’s because it’s the first since before the recession in which payroll growth exceeded 300,000 with unemployment below 6 percent, he said.
The breadth of industries hiring last month was the broadest since 1998, a sign the benefits of the expansion were rippling through the economy. Factory payrolls rose by the most in a year, professional and business services companies took on more employees than at any time since November 2010, financial firms boosted payrolls by the most since early 2012 and hiring at retailers picked up.
Venus Bryan is among Americans seeing an improvement, even as it’s been slow to develop. After a three-month search, Bryan, 24, will start a seasonal job next week at J.C. Penney Co. in Roanoke, Virginia, where she’ll be creating displays and changing signs and price tags on merchandise.
While she’d like to be able to put her sociology degree to use one day, Bryan said she needed to get work experience on her resume. Her new full-time job is “a starting point,” she said.
“It may not be exactly what you want at that moment, but I think the job market is getting better,” Bryan said. “It just may not be improving fast enough for some people.”
Treasury yields rose as traders bet the improvement in the labor market will help reassure Federal Reserve policy makers that the economy is strong enough to withstand an increase in borrowing costs next year. The yield on the benchmark 10-year Treasury note climbed to 2.31 percent in New York late Friday from 2.24 percent the prior day.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 trading partners, gained 0.9 percent, and the Standard & Poor’s 500 Index advanced 0.2 percent to close at a record 2,075.37.
The November gain in U.S. payrolls was the biggest since January 2012, and exceeded the median forecast in a Bloomberg survey of 100 economists, which called for a 230,000 increase. Estimates ranged from increases of 140,000 to 306,000.
Revisions added 44,000 jobs to payrolls in the previous two months. To calculate the data, the Labor Department surveys businesses and households for either the pay period or week that includes the 12th of the month.
“The underlying strength is definitely there and that’s evidenced by the fact that the September and October numbers were also revised up,” said Nariman Behravesh, chief economist for IHS Inc. in Lexington, Massachusetts, and the second-best forecaster of payroll gains over the last two years, according to data compiled by Bloomberg. “We have a very strong labor market.”
The term secular stagnation, coined by economist Alvin Hansen during the Great Depression, refers to an extended period of little or no economic growth. It has recently been revived by former Treasury Secretary Lawrence Summers and others to describe the state of the economy after the last recession.
Summers stuck with his warning that the economy could be mired in an era of low growth.
“When I put forward secular stagnation, it wasn’t to say that we were permanently doomed never to have a good month,” Summers, now a professor at Harvard University in Cambridge, Massachusetts, said in a brief telephone interview Friday. “The economy certainly does not appear to be stagnant at the moment,” he said, although “whether growth can be sustained at rapid rates at normal type interest rates conducive to financial stability is certainly not yet fully established.”
DeLong, of the University of California at Berkeley, and Summers have called for more government spending to bolster the recovery.
Krugman, a Princeton University economist, wrote Friday in his New York Times blog that this was “a genuinely good employment report.” At the same time, he said there is a risk that the Fed tightens policy too soon.
Fed policy makers are monitoring labor market improvement as they consider when to raise borrowing costs for the first time since 2006. The next meeting of the Fed’s Open Market Committee is Dec. 16-17, and a majority of policy makers forecast they will start raising interest rates at some point next year.
Krugman warned in mid-October that policy makers face the risk of a renewed downturn, similar to one that occurred in 1937 following the Great Depression. “We are by no means out of the Lesser Depression,” he wrote then.
“You are finally seeing a recovery dynamic that is maybe five years late,” said Stanley, who says he was expecting monthly job gains of around 200,000 this year. “Now it feels like a natural recovery. The trend may well be 250,000 now, which is a step up.”
The Labor Department’s report showed hourly earnings of all workers rose 0.4 percent on average to $24.66 in November from $24.57 in the previous month. They were up 2.1 percent over the past 12 months.
The steady progress in the job market, along with falling gasoline prices, has brightened consumers’ spirits. With fuel prices at a four-year low and still dropping, Americans are flocking to auto dealerships.
“By any measure, households are reaping significant disposable income gains each week at current gas prices,” Emily Kolinski Morris, chief economist at Ford Motor Co., said on a Dec. 2 conference call. “Importantly, younger and lower-income households are now seeing improved personal financial condition in part due to lower energy prices."
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