Jobs Growth Adds More Sunshine to U.S. Economic Performanceby
Nearly seven years after the last recession began, the U.S. economy has been ticking along at a good clip lately. Private employers added 281,000 jobs in June, according to a report on Wednesday from the ADP Research Institute, a number that exceeds the most optimistic forecast of economists surveyed by Bloomberg.
The official numbers for May from the Bureau of Labor Statistics come out on Thursday, and the strong ADP number, while not perfectly reliable as a predictor, increases the likelihood that the Bloomberg survey median (215,000 growth in private payrolls and zero growth in government payrolls) is too low.
This chart shows U.S. payrolls—including government employment not included in the ADP survey—through May. That was the first month that employment in the U.S. climbed above where it was when the recession began in December 2007. The June number coming out on Thursday will extend the chart line upward and to the right.
“The labor market appears to be firing on all cylinders and is finally self-sustaining,” wrote two PNC Financial Services economists, Stuart Hoffman and Gus Faucher, in a note on Wednesday.
No one is arguing that all is well. Long-term unemployment remains high and lots of the new jobs pay below-average wages. Productivity growth is weak, and that’s actually one reason for the strong job growth—companies need to hire more people to get the job done. And consumer spending adjusted for inflation fell in both April and May. “The economy is not growing quickly enough to use up the excess capacity that has accumulated since the crises began several years ago,” Steven Ricchiuto, chief economist of Mizuho Securities USA, wrote in a note.
Still, the economy is certainly looking stronger than one would guess from the government’s June 25 report that gross domestic product fell at an annual rate of 2.9 percent in the first three months of 2014. Economists are now estimating that the U.S. economy grew at a 3 percent annual rate in the just-finished second quarter—a huge turnaround.
The other good news aside from job growth: Capital goods shipments came in above expectations on Wednesday, and researcher Autodata reported on Tuesday that U.S. light-vehicle sales rose to an annual rate of 17 million in June, making it the best month since July 2006. Even General Motors, whose reputation has been damaged by recalls, experienced a sales rise.