How is the national economy doing?

How is the national economy doing?

January jobs data were just released and it contained some remarkable data.  Bear in mind that the deep recession of 2009-2010 entered into a recovery phase in mid-2010 but payroll employment in the private sector did not return to the pre-recession level until early 2014.

Over the eight years from 2008 through 2016, private employment rose an average of 922,000 per year, owing to the deep and lengthy recession and the abnormally weak recovery. Job gains measured over the previous 12 months in 2015 and early 2016 were fairly robust but had tapered off by the second half of 2016.  They remained tepid until 2018 when they began to accelerate again and by January of this year had grown almost 2.7 million compared to January 2018.

It is important to note that in 2017 a strange phenomenon occurred. While manufacturing jobs posted gains every month but one, some service sectors had weak or no gains. By December 2017, manufacturing jobs were 190,000 above the December 2016 level. And with continued expansion in 2018 and this January they are 260,000 above the 12-month earlier level and 450,000 above the January 2017 level.

Given the much higher productivity levels in manufacturing compared to retail and leisure jobs, as well as many other service sectors, the gains in manufacturing employment are a major reason for the pickup in real GDP growth.

One more statistic is worth noting in connection with improved employee incomes: For the first time in the period since 2006, when aggregate weekly payrolls for all private sector employees have been officially reported, 2018 saw the annual increase top 5 percent with a reading of 5.22 percent. And in January 2019, the 12-month rise since January 2018 hit a stunning 5.7 percent — a far better reading than the last precession annual increase in 2007 or the average of the 2010-to-2016 recovery period, each at just over 4 percent.

The strong recent gains reflect growing employment, longer average work weeks and pay hikes — a powerful and desirable combination. And it is happening despite the fact that the recovery is now entering its ninth year and defies all the punditry and naysayers telling us it cannot happen.

But far improved regulatory policies, tax cuts and a shift toward bolstering the manufacturing sector have paid huge dividends. And with room to go still in raising labor force participation, who knows how long this can be sustained. Likely until politicians and their followers who cannot stand prosperity decide to try to kill it.