On Friday, the US Bureau of Labor Statistics released the employment report for February 2018. It surpassed and surprised analyst estimates by adding 313,000 jobs. The unemployment rate remained at 4.1% for the fifth consecutive month, the lowest rate in 17 years. Analyst had expected that the US had added about 200,000 jobs and that the pool of potential workers has been depleting. These new figures suggest otherwise, and the last time the US experienced large gains with low unemployment was during the economic boom of the 1990s. The US has added over 500,000 new jobs since the start of 2018, and the labor force participation rate has increased as well—its best one month gain in over 8 years. On top of topping estimates, wage growth was rather modest as it grew 2.6% compared with a year earlier. This addition of new jobs and modest wage growth defused fears about inflation and the Federal Reserve raising interest rates more aggressively. The Dow Jones Industrial Average gained over 350 points from open to close on Friday trading.
Some analysts and economists believe that the economy still has room to grow. The labor force participation rate has been in long-term decline for the past years. This is mainly due to the Baby Boomers generation retiring and decreasing the labor force. Fortunately, the February figures were strong last month, and more Millennials (ages 21-37) will enter the labor pool. According to the Pew Research Center, population projections from the US Census Bureau estimate the Millennials will swell to 73 million, and the Boomers will decline to 72 million by 2019. Hopefully, younger Millennials entering the labor force after college will offset or outweigh the decline in the Boomers participation. Notable chief economists such as Guy Berger (LinkedIn) and Jed Kolko (Indeed) believe that there will be further expansion in US employment as well. Furthermore, record-breaking corporate earnings also support the strength of the US economy. American corporations have been on a surge by beating Wall Street estimates on their quarterly earnings reports. On top of strong earnings growth, the economy is also benefitting largely from President Trump’s fiscal expansionary policy of corporate tax cuts. With all these factors, the US economy is poised for growth.
Consumer confidence and strong economic growth suggest that the recovery from the Great Recession has ended and, perhaps, that we are experiencing a new economic boom. Although wage gains were modest this month, the job additions were tremendously high. This economic strength is great for both companies and unemployed workers. During times of economic expansion, consumers will consume more and will drive up demand. It is the supplier’s or the business’s responsibility to supply these increased demands. Businesses may have difficulty in meeting these demands because of capacity constraints in their supply chain or production process. It is necessary and advantageous for businesses to expand production by investing in capital and human capital, the labor force, in order to meet these demands. After all, you are investing in the American economy.