After meandering through five years of uncharacteristic performance, the last several months signal economic growth has finally hit a normal stride. For three consecutive months the economy produced an average of 272,000 jobs. This amount is more than adequate to absorb displaced workers who are re-entering the market and normal labor force growth. The expansion is now marching to a normal beat.
The Labor Department latest jobs report, covering activity in June, revealed 288,000 new jobs were created and the unemployment rate declined to 6.1% from 6.3% the month before. If the current pace of recovery continues, next months unemployment rate should enter the 5 percentage point region – something unimaginable in recent years.
The economy is defying the odds in another respect. Specifically, since World War II the average expansion has lasted five years. The current recovery began in June 2009, which means last month the economy crossed the five-year threshold, and it seems poised to continue to grow months if not years into the future.
Virtually all segments of the economy experienced gains. Unemployment among blacks has been particularly intractable. Yet last month it declined by almost a full percentage point, from 11.5% to 10.7%. This decline is a bellwether. An unfortunate fact is that employment gains among blacks have always trailed gains of every other demographic group. So when their rate shows improvement, rates among other groups have already recovered. Black unemployment declined over the last year from 13.5% to its current level of 10.7%.
A final important signal of a return to normality is the fact that the unemployment rate dropped even though 81,000 workers came back into the labor market. This means job growth was substantial enough to absorb the new influx as well as those who remained in the labor market searching for work. The numbers of unemployed persons declined by 325,000, in June, while the number of employed persons increased by 407,000. These are indeed signs of a very healthy recovery.
No longer do we have to look for the light at the end of the unemployment tunnel, we have finally exited the tunnel. The question remaining is how long will the Federal Reserve allow the recovery to continue before raising interest rates to combat inflation.