A nice, solid jobs report yet again. Following a blow-out November report of over 250,000, the United States added another 145,000 jobs in December. The unemployment rate remained at a 50-year low. More eye-opening, the U-6 unemployment report (aka the underemployment report) is at a low for this century, which sounds like a lot but that data series hasn’t been around quite as long. Paradoxically, the call on the underemployed may explain why wage growth remains somewhat subdued.
Why “paradoxically”? Because underemployed workers may have lower “reservation wages” — the lowest wage they will accept for a job — than the public as a whole. The long/short of the labor market: the 2019 growth in labor supply averaged 120,000 per month, well below the actual pace of job creation, i.e., demand. With the Federal Reserve set to stay on the sidelines for a while, things look good for the economy.
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