Economists have varying estimates as to what levels of gains in non-farm payrolls it takes to heal the jobs market. This figure number is usually between 100,000 and 200,000 per month.
A smaller gain wouldn’t do the trick because the US labor force is constantly expanding each month due to immigration and younger Americans entering the workforce. The gains, therefore, have to meaningfully exceed this expansion.
For the three-month period from February to April 2011, monthly non-farm payrolls gains exceed 200,000 each month, which – excluding the distortion from the 2010 temporary census hirings – hasn’t happened since early 2006.
More importantly, it’s the first time since the financial crisis that the US economy stringed together a few consecutive months of robust job creation.
If sustained, this would mark the beginning of a healing process for the jobs market and a decline in the unemployment rate.
“The average gain in non-farm payrolls over the past three months is now 233K. The perception now is that the US is creating enough jobs on a consistent basis to drive the unemployment rate back below 8.0 percent within a 12-18 month time frame,” said Michael J. Woolfolk of BNY Mellon Global Markets.
The healing of the jobs market would have significant impact on the broader US economy.
Consumers will have more confidence to spend money. The real estate market will also benefit from this increased confidence. Moreover, the Federal Reserve will be spurred to tighten monetary policy sooner.