By Jeff DeAngelis, former chief investment officer of Northwestern Mutual Wealth Management Company.
It’s the kind of economic news many have been looking for: The monthly jobs report from the U.S. Bureau of Labor Statistics showed that the U.S. economy added 288,000 nonfarm jobs in June. It was the fifth straight month of gains above 200,000—a run unmatched since the period of September 1999 to January 2000. At the same time, the unemployment rate fell to 6.1 percent, the lowest level since September 2008.
Job creation was widespread across sectors, and there were few signs of inflationary pressures, suggesting that the economy is transitioning to a faster pace of growth. This helped to lift the stock market to new highs. In early July, the Dow Jones Industrial Average closed above the 17,000 threshold for the first time. The Standard & Poor’s 500 Stock Index also recorded a new high, as did the tech-heavy Nasdaq, which had its best outing since the go-go days of 2000.
No One Is Arguing That All Is Well, However
While the number of people out of work for more than six months has slowly chipped downward, long-term unemployment remains high. In addition, the number of Americans employed part time for economic reasons, either because their hours had been cut back or because they were unable to find full-time work, increased by 275,000 in June to 7.5 million. This may be better than prolonged joblessness, but it’s not a path to sufficiency, let alone prosperity.
Meanwhile, wages—another key benchmark of labor-market health—haven’t increased significantly for most workers. Over the past 12 months, average hourly earnings for all employees rose by just 2 percent, aligning closely with consumer-price inflation but doing little to aid economic growth. These slow-to-grow wages suggest that employers don’t yet feel compelled to raise wages—or to scale back their required qualifications—in order to attract workers.
For the First Time in a Long Time, Many Believe This Could Finally Change.
June’s job gains were not just in well-paid white-collar professions; most were in the middle tier of jobs that enable workers to gain a foothold in the middle class. For example, manufacturing companies hired 16,000 workers in June, with all of the increase in durable goods manufacturing; transportation companies added 17,000 employees, up from an average of 11,000 jobs per month over the prior 12 months; and health care employment increased by 21,000. The increases have helped boost Americans’ optimism in their job prospects going forward.
Gallup, for example, found recently that 35 percent of Americans say now is a good time to find a quality job, up 7 percentage points from last month. In fact, this is the most optimistic Americans have been about the job market since the starting point of the Great Recession. Equally significant is that job optimism has increased among all major demographic groups Gallup tracks. In July, young Americans, wealthier Americans, democrats and those with advanced degrees were the most optimistic about finding a job. Even so, the greatest gains in Gallup’s recent poll were seen in how lower-earning, less educated workers see their job prospects.
Better Times Ahead?
While the 35 percent now calling it a good time to find a quality job may not seem very high, Americans’ improving view of the job market is one more sign that better times may lie ahead. If the economy continues to add jobs at the current pace, many economists believe we can reach pre-recession employment levels in the not-so-distant future. And with more Americans back in the workforce, this could be the catalyst that finally pushes wages higher. In the end, that’ll be good news for all of us because real wage growth is the basis for economic growth.
Northwestern Mutual Wealth Management Company is a subsidiary of The Northwestern Mutual Life Insurance Company.
The opinions expressed are those of Jefferson DeAngelis as of the date stated on this report and are subject to change. There is no guarantee that the forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. Information and opinions are derived from proprietary and non-proprietary sources.
Please remember that all investments carry some level of risk, including the potential loss of principal invested. No investment strategy can guarantee a profit or protect against a loss. Returns represent past performance, are not a guarantee of future performance and are not indicative of any specific investment.
The Dow Jones Industrial Average Index® is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since Oct. 1, 1928.
Standard and Poor's 500 Index® (S&P 500®) is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index® Stocks traded on the NASDAQ stock market are usually the smaller, more volatile corporations and include many start-up companies. The NASDAQ (National Association of Security Dealers Automated Quotations) is a computer operated system owned by the NASD that provides dealers with price quotations for over the counter stocks.
