The second longest recovery … the second longest bull market … the longest period of job growth on record.
Such records are pretty meaningless. The recovery has been pretty anemic, with 2% growth through most of it, compared with the historical average of 3.3%. The bull market is partially the result of market manipulation by the Federal Reserve Board. And the current 91 months of job growth, recorded in the April Jobs Report, wouldn’t have happened without the financial crisis boosting the unemployment rate into double digits.
The current unemployment rate — now below 4% for the first time since late 2000 — excludes those who have given up looking for work and includes those who are working in part-time or low-paying jobs.
The U-6 unemployment rate, which provides a truer picture of unemployment, is still 7.4%, although it has dropped significantly since Jan. 31, when it was 8.9%. Meanwhile, the labor force participation rate ticked up from 62.9% in March to 63% at the end of April. That’s about equal to its average of 62.99% from 1950 until 2018, but well below its all-time high of 67.30%, reached in January 2000.
In addition, the 164,000 jobs added in April is well below the 200,000 average we previously enjoyed this year and last year’s average of 182,000 jobs per month.
Inflation in Check
Regardless, 91 consecutive months of job growth is a good thing. And while the Fed has been focusing all of its efforts on boosting inflation to 2%, the rest of America is relieved to find that inflation remains in check, even as the jobless rate continues to drop.
“Investors were cheered in part by signs in the report—including modest wage gains—that inflation is so far contained and the Federal Reserve can stay on its planned path of gradual increases in short-term interest rates,” according to The Wall Street Journal.
Historically, other times when unemployment fell below 4%, recession followed. But in those periods — during the Korean War, the Vietnam War and the tech boom in 2000 — low unemployment was linked to growing inflation or financial excesses.
One reason inflation may still be relatively low is that wage increases have been modest, with 2.6% growth over the past year. Wages may be rising at a slower rate than they normally would, because retiring baby boomers are being replaced by younger, less experienced and lower paid employees.
While low unemployment and somewhat faster economic growth are positive signs, and low inflation indicates that economy is not overheating, the missing component that would complete a rosy economic picture is improving productivity.
“Productivity picked up modestly in the past year,” according to The Journal, “and some economists believe the tax overhaul, championed by President Trump and passed by Congress late last year, will prod businesses to increase spending on technology, boosting productivity further.”
If that happens, we may see the longest recovery — and longest bull market — on record.