For the first time since the recession ended, America’s job market has been firing on all cylinders: Workers have been finding more jobs, making more money and spending more of their paychecks.
So far this year, the economy has added an average of 192,000 jobs a month, a healthy pace that has renewed hope of finding employment for many workers. Those who already have jobs are enjoying the fastest wage growth since the recovery began. And that is helping to give households the confidence to spend their money, fueling the biggest spike in purchases in seven years.
New data slated to be released Friday will shed light on whether these trends continued in May. But the solid performance of recent months has shown that the economy can withstand the global turmoil that has repeatedly threatened to sideswipe the American recovery. Just a few months ago, analysts were raising the specter of another U.S. recession as plunging oil prices, a strong dollar and a slowdown in China caused wild swings in financial markets. Now, there are fears that Britain’s historic vote later this month over whether to remain in the European Union will spark renewed turbulence around the world.
That could prompt the Federal Reserve to wait until July to raise interest rates again, rather than at its meeting later this month. Still, barring a “Brexit,” the central bank is widely expected to move this summer, a sign of how resilient the economy, and particularly the labor market, has proven.
The recovery from the Great Recession is now in its seventh year, making it one of the longest expansions in the nation’s history, though analysts have predicted its demise time and again. From the government shutdowns in Washington to the sovereign debt crises in Europe to the latest scares of a slowing China, the U.S. economy has pulled through, even if it has never quite taken off.
“The economy seems to pulse -- surges a little bit, pauses, surges a little bit, pauses,” said Kevin Logan, chief U.S. economist at HSBC. “And in the end it’s nothing.”
The Labor Department is slated to release its official monthly tally of job growth Friday morning. Analysts are predicting it will show the economy added 160,000 jobs last month and the unemployment rate dipped to 4.9 percent -- the statistical equivalent of smooth sailing.
“Consumer spending will continue to lead economic growth in 2016 as more jobs and rising wages give households more money to spend,” said Stuart Hoffman, chief economist at PNC Financial Services Group.
But even if government’s jobs report disappoints on Friday, economists say the progress in the labor market is clear. The national unemployment rate peaked at 10 percent following the recession and has since fallen by half, and the economy has added jobs every month for more than six years.
Hiring has moderated from last year’s breakneck pace of more than 200,000 jobs a month, but analysts say a slowdown is inevitable as the unemployment rate reaches its lowest sustainable level. In addition, the government’s figures for May could be distorted by the strike of roughly 35,000 Verizon workers.
But perhaps even more important than the sheer number of jobs created is how much those positions pay. For years following the recession, wage growth appeared stuck at about 2 percent. But workers’ average hourly earnings began inching up last fall and now growth hovers around 2.5 percent. Low inflation and the drop in gas prices at the end of last year also helped pad household budgets.
That set the stage for a surprising spike in consumer spending. Government data released this week showed household purchases jumped 1 percent in April compared with the previous month, the biggest increase in seven years. Analysts surmised that the strong showing was the result of pent-up demand after Wall Street’s rocky start to the year.
“We expected consumers to come out swinging in April, especially as the stock market came back to life,” said Chris G. Christopher, director of consumer economics at IHS Global Insight. “Consumer spending remains one of the bright spots in the economy.”
The pattern seems to have repeated this spring. Recent forecasts suggest the economy expanded at an annual rate of 2.5 to 3 percent during the second quarter, up from just 0.8 percent at the start of the year. The government won’t release its official estimate until next month.
There is little hope that pace can be sustained, however. The U.S. economy has grown at an average annual rate of 2 percent since the recession, compared with 2.6 percent in the early 2000s and 3 percent during the 1990s. Economists point to the aging of the population, weak capital investment and the lingering wounds of the financial crisis as possible explanations for the slowdown.
And though American households appear to be on firm footing, business investment has been particularly weak and exports have declined, further restraining growth. In fact, the tepid nature of the U.S. recovery may leave it susceptible to derailment.
The latest threat is the potential for Britain to vote to leave the E.U. — a move commonly known as “Brexit.” The referendum is slated for June 23, but the uncertainty has already caused dramatic moves in the British pound. An exit from the 28-country union could embolden nationalist movements elsewhere in Europe and spark major disruptions in trade and financial markets that could spill over to the United States.
The Fed is slated to meet in Washington just one week before the vote to debate whether to raise interest rates, another step in removing its support for the U.S. recovery. Earlier this year, the central bank opted to stay its hand amid financial market turbulence. Some analysts believe it may punt once more, until its subsequent meeting in July.
Others are even more skeptical. Economists at BNP Paribas do not forecast any Fed rate hikes until 2017. The recovery, they believe, will need every ounce of the central bank’s support.
“The fact that we made it through those shocks still with somewhat positive growth is a good thing. It speaks to the resilience of the economy,” BNP senior U.S. economist Laura Rosner said. But, she added, “it’s sort of this low-growth, low-inflation regime where the U.S. economy remains vulnerable to shocks.”