US Job Market ‘Best in a Generation’
For a at least 10 years after the collapse of Lehman Brothers touched off a global financial crisis, there was good reason to believe the US economy remained broken, from skepticism about the health of the labor market to the slow economic growth and the record low rate of interest paid on US Treasuries.
Then that changed last week, adding facts on the ground to Fed Chairman Jerome Powell’s glowing portrait of a historically rosy and extended period of super-low unemployment, modest inflation and steady growth.
It came through Amazon.com Inc.’s move to a $15 minimum wage, possibly setting the bar for companies nationwide. It came through a jump in long-term bond yields that signaled faith the gears of growth will remain engaged for a record-long recovery.
Last Friday, it came through the 3.7% unemployment rate, a 49-year low, continuing a run of employment growth that many analysts, including at the Fed, have long expected to slow.
“Wage inflation is creeping higher,” said the senior economist at Ameriprise Financial Services Inc..
“There’s no question the job market in the United States is possibly at its best in a generation. There is no question or debate about that. The jobs report has become a inflation report.”
T-Bond yields rose further on the payrolls report, with the benchmark 10-yr T-Note yield touching its highest mark since Y 2011, and US stocks slipped.
- 2-yr +1 bpt at 2.88%
- 5-yr +2 bpts at 3.07%
- 10-yr +3 bpts at 3.23%
- 30-yr +4 bpts at 3.40%
The week’s events were not only consistent with the good times scenario both Chairman Powell and US President Donald Trump have laid out. They validated it, and in doing so pointed to a US economy that may be starting to work more like it used to.
As an exercise in Supply & Demand, Amazon’s (NASDAQ:AMZN) decision to raise starting wages across the board was perhaps the best example. The Fed and other officials have been anticipating this for a while, and that the lack of available workers would prompt companies to raise wages, it is happening.
When productivity growth is faster, that is the opportunity to share some of the extra output with the workers. That is what gets wages higher,
Former skeptics have become open to the idea that a recent rise in productivity may turn into a trend, drawing comparisons with the “Great Moderation” period of growth during the 1990’s, which also featured low unemployment and solid wage growth.
Have a terrific week.