Yahoo Finance Why the US Economy Has Been Riding High in Recent Years
This Truth about the US Economy May Surprise You
Rick Rieder shares one widely-ignored sign that the U.S. economy has actually been operating at a very high level in recent years.
Many commentators seem to be pessimistically focused on the U.S. economy’s weak wage growth and manufacturing sector trouble. They don’t appear to be paying attention to the signs that the U.S. economy has actually been operating at a very high level in recent years, including one statistic that shows the economy’s true strength.
This statistic, which may surprise you: In aggregate, the hiring of 8.1 million people over the past three years is equal to all the U.S. job creation accomplished in the 14 years prior, according to a BlackRock analysis of jobs data following the March employment situation report. See the chart below.
Market Realist – Robust job creation for the past three years
While rising job numbers suggest faster economic growth, sluggish wage growth raises concerns about broad-based labor market improvement. However, slow wage growth isn’t related to a weak labor market. Rather, it may be due to structural factors affecting the broader economy. On one hand, higher-wage Baby Boomers (people born between 1946 and 1964) are on the verge of retiring. On the other hand, low-wage workers who lost jobs during the 2008–2009 recession are coming back to the market and taking new jobs. These two factors are mainly responsible for sluggish wage growth.
Declining manufacturing (IYJ) growth is an often-discussed indicator affecting the US economy (IJH)(IWD). Manufacturing growth—measured by the ISM index—ended lower for the fifth month in a row. However, it expanded in March and rose to 51.8 from 49.5 in February. An ISM above 50 indicates growth. Despite a rise in the ISM, the manufacturing sector posted a steep loss of 29,000 jobs in March and 18,000 in February. These numbers starkly contrast with the healthy job market, led by improving demand for homes (ITB), healthcare (IYH) services, and hospitality.
A silver lining that’s often overlooked when people focus on the above indicators is the significant hiring that took place over the past three years. The strong uptick in hiring reflects a more vibrant labor market. It also shows that businesses are more confident about the economy’s future. Hiring continued to rise recently and has now returned to pre-recession levels. It jumped to a nine-year high in February to 5.4 million—a 5.8% jump from January, and the highest since November 2006.
In the rest of this series, we’ll discuss the strengths of the US labor market and why it’s likely to slow in the second half of the year, led by additional headwinds.
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