Great Job Numbers for 2013 and a Happy New Year for 2014

Depending on how you measure it, this is the best year for job creation in 8 to 30 years. That bodes well for 2014.

Measured by job creation, this is the best year since 2005, when the American economy created 2,484,000 jobs. (The best year making the reasonable assumption that during this month of December the economy creates at least 131,000 jobs.)

Measured by a drop in unemployment rate, this is the best year since 1983. The drop of 0.9%, from 7.9% to 7.0%, is the steepest in 30 years.

What is most notable about this is that it comes on the heels of three years of steady growth. Depending on December's numbers, the four year moving average for job creation could finish at its highest since 2000, at the close of the dot-com boom.

But of course the unemployment rate is still high by historic standards, although the lowest it has been since just after the Lehman Brothers collapse 5 years ago. (The September bankruptcy of Lehman Brothers remains the simplest point of origin for the Great Recession. Although unemployment had been steadily rising throughout the year leading up to Lehman Brother's collapse, in the 12 months after that the American economy shed 6.8 million jobs. How much is 6.8 million? It is twice as many jobs as the American economy has ever created in a single year. And of course those twelve months were just part of a larger string of 25 months during which the economy shed a staggering 8.7 million jobs, the hole from which we've been digging ourselves out ever since.)

What is most remarkable about this performance is that it has come in the face of on-going troubles in Europe, steady erosion in the number of government employees, and continued uncertainty about debt ceilings and sequester cuts from Congress. Many local governments have been contracting even while the private sector has been recovering. This recovery has been hurt as much by international markets and government policy as it has been helped.

Next year will be even better. Wanting to get re-elected, the House GOP will stop threatening the economy. Europe is steadily improving and as the threat of defaults recedes, markets should become more stable. Companies will start worrying as much about missing out on the boom as they have been worrying about getting hurt by the bust; they'll begin to invest and hire more aggressively.

This year has been good. Next year will be better.

There is a good - although less than 50% chance - that unemployment will drop below 6% by the end of 2014. GDP growth will be closer to 4% than 3%. And the stock market will continue to do well (double-digit gains at least, perhaps as high as 25%) but will get hit hard at least a couple of times by changes in monetary policy (tapering QE)  from our new Fed Reserve Chairwoman Janet Yellen.

There are a lot of reasons for this improvement but the biggest may be simple optimism. In just the last two months, the percentage of people who are thriving has gone up 3 percentage points, from 50% to 53%. In that same time, Gallup's confidence index has gone up 17 points.

For years, every bit of good news has been met with the caveat that something bad could happen to reverse it. Of course this is true - it is always true. But it is also true that the next thing to happen could be good, could make things even better. Part of what makes a boom a boom and a bust a bust is whether the average person is more likely to be optimistic or pessimistic. Next year people will steadily shed their worries  and hesitations about the economy, increasingly ready to buy rather than wait, charge it rather than pay down debt, hire rather than layoff, and invest rather than stay on the sideline.

At least that is my prediction. I could be wrong.