- Job applicants await their turn at the Lockheed Martin booth at a U.S. Chamber of Commerce Foundation ‘Hiring Our Heroes’ military job fair in Washington on Jan. 8.
- GARY CAMERON/REUTERS
Here’s a fun fact to start the 2016 presidential election cycle: Since 1968, only one other election year began with a lower unemployment rate and that was the go-go year of 2000, when the tech boom was underway and joblessness averaged a cool 4%.
So is the economy on a similar tear? Will the momentum of robust job growth redound to the favor of the Democratic nominee, who will run touting the good works of the White House?
Needless to say, it’s not so simple. For one, political credit for a robust economy isn’t easy to transfer, as Al Gore learned to his dismay in 2000.
And secondly, despite the 4.9% jobless rate in January—tied for the lowest since the recession began in 2007—the U.S. economy is wrestling with significant and durable challenges. Listen to Hillary Clinton, the candidate most clearly running on the strength of the administration’s record. “The economy has not been working for most Americans,” she said at the Feb. 4 Democratic debate in New Hampshire.
A gleeful President Barack Obama seized on the January jobs report, telling reporters in an impromptu press conference Feb. 5 that “the United States of America right now has the strongest, most durable economy in the world.”
At the moment, the odds of an outright recession between now and November seem slim. The Journal’s own squad of economists, surveyed last month, put the chance of a recession in the next year at just 17%–the highest risk in three years, but still low. And Mr. Obama is right: The U.S. has shown unusual resilience in the face of a surging dollar, skittish investors and myriad headwinds abroad, not the least of which is a weakening China.
But significant unease hangs over many facets of both the U.S. job market and the wider economy.
Perhaps the biggest concern, highlighted daily on the campaign trail, is wages. The Friday jobs report brought good news on that front, with wages rising at an annual rate of 2.9% over the past six months, the fastest pace since the recession.
The uptick, with a particularly strong number in January, could suggest a diminishment of slack in the workforce as a lower unemployment rate compels employers to pay more to hire and retain staff.
It’s far from clear, though, whether this stronger wage growth will prove lasting. Economists speculated that one force driving the wage growth in January was a boost in the minimum wage across 14 states, which began at the start of the year.
The U.S. also began the year with a continued stretch of sturdy hiring—the longest streak of private-sector job growth on record, as the White House likes to point out—but amid warning signs as well that typically forecast a coming recession.
Industrial production, corporate profits and the stock market have all posted declines in recent months, indicating weakness in manufacturing and business growth that has in turn helped spook investors. Economists are also puzzled by the disconnect between job gains—up 2.4% in the fourth quarter of last year—and growth in the overall economy, which expanded just 0.7% over the same period.
It would be highly unusual, if not unprecedented, to see the country tumble into recession before the November election. Rising unemployment and high oil prices have usually been strong signals of a coming downturn, and both are now heading in the opposite direction.
Since 1964, three election years—1980, 1992 and 2008—have posted a higher unemployment rate in November than January, the first and third as the result of a recession. So as you track the latest poll numbers, keep an eye on the jobless rate, too.
Related reading:
The Economy, Ever a Risk in Election Years, Is Good So Far
Trump Leads GOP by Wide Margin in Poll
Video: Three Things to Watch in the GOP Primary in New Hampshire:
from Real Time Economics http://ift.tt/1PgV5nI
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