Amid the clamorous tumult of global stock markets, the December Bureau of Labor Statistics jobs report offers reassuring stability – 292,000 new jobs with the headline unemployment rate steady at 5 percent.
The U.S. has now enjoyed a record 70 months of private sector jobs growth and 14.1 million jobs created since the end of the recession in 2009, and official unemployment at half its recession depths.
The continued growth is accompanied by continued discontents. Participation in the economy – those with jobs or looking for them – remains depressed, and didn’t improve over the course of 2015. Unemployment among African-Americans and Latinos, although declining among the former, remains grim, at 8.3 percent for African Americans and 6.3 percent for Hispanics. And, wage growth continues to disappoint. Average hourly wages for workers (not supervisors) changed little over the month, rising about 2.4 percent in 2015.
The December jobs report contains few indications of the storms battering stock markets over the past days. The Federal Reserve, which raised its interest rates a tad (0.25 percent) in December, believes that the momentum in the U.S. economy – with consumers enjoying more money in their pockets from the decline in prices of gas and imported goods – will buffer it from the global turmoil.
Perhaps. But when British Chancellor George Osborne warned of a “cocktail of risks” spilling over from abroad, he was talking about a drunken brawl, not a genteel soirée. The question is whether the U.S. can sustain growth as the rest of the world economy reels. China’s slowing growth – surely worse than its published figures – has battered stock prices – and is leading to devaluation of its currency. The so-called emerging nations are now submerging, with Brazil and Russia in recession. Europe – racked by austerity, floods of immigrants and terrorist fears – nears stagnation, with fears of breakup far greater than hopes for greater integration. With the Fed slowly tightening, the dollar keeps rising, even as U.S. trade deficits grow.
In the run-up to the Great Recession, the U.S. served as the consumer of last resort for the world economy – until the housing bubble burst and the financial house of cards collapsed. Now the U.S. is an island of slow growth in a world of turmoil.
Central banks pride themselves on acting preemptively to forestall potential inflation even when it is not yet on the horizon. Now we need governments and central banks to act in coordinated fashion to fend off the threat of global stagnation that is already on our shores.
The latter is a far greater and more imminent threat.