The labor market improvement was spectacular in November with +321 000 jobs that have been added. January 2012 was the last month with higher jobs creation (360 000).
When we look at the last four years we see a deep change since last April. That’s what is shown on the first graph. Since last April the number of new jobs is systematically higher than the average of the previous three years. The economy appears to be more robust.
The change seen in the chart is observable for the total employment figure and for the private employment figure.
There is a change in regime for the US economy this year.
Nevertheless, the employment dynamics appears to be weak when it is compared to previous cycles. This can be seen on the second chart. The slope of the current employment profile is flatter than during all the economic cycles seen since 1960. That’s also a reason that can explain the lack of pressure on the labor market.
From January 2008 (employment peak of the last cycle) to November 2014 employment has grown by 1.2% (1 680 000 new jobs). On the same period the labor force has increased by 2 334 000. That’s also a reason of the absence of pressures on the labor market.
The sectoral distribution of new jobs is also very informative. On the chart I have taken large sectors and based employment at 0 in January 2008. In November 2014 we see that profiles are very heterogeneous.
The sector of Education and Wealth has created a large number of jobs. It is also the case for Professional and Business Services and for Leisure.
But for retail sales, wholesale, finance-real estate and for the information sector, net figures are still negative. It’s also the case for government employment.
We also see that employment in the construction sector and in the manufacturing sector the level of employment is still well below the January 2008 peak. And the slope of the recovery is almost flat.
In other words, the jobs creation momentum is still weak compared to previous cycles and in the current cycle the jobs distribution is still very heterogeneous.
So there is no surprise that the wage growth rate remains at a very low level. In November wages in the private sector is up by 2.1% compared to November 2013. There is no breakage and the trend is the same since 2011.
Are those figures sufficiently strong to force the Fed to change its strategy rapidly? I don’t think so. The employment momentum is still low by historical standard; the sectoral distribution of jobs is still very heterogeneous and there are no nominal pressures as wage change is low.
There is no reason to hurry.