03 July 2014

The Recovery That's Only Gaining Momentum

Measured as uninterrupted months of job creation, this recovery is on track to set a new record. Uniquely, just as past recessions were faltering, this one is gaining momentum.

This graph shows the change in unemployment rate from the year before, a measure of the drop from June to June.

The drop from 7.5 last June to 6.1 this June - a drop shown here as 1.4 percentage points - is the largest drop yet. This makes the 45th month of uninterrupted job creation and the biggest year over year drop yet. This recovery appears to be gaining momentum. (And the 6.1 is the lowest unemployment has been since September 2008, when Lehman Brothers went bankrupt as trigger to the Great Recession.)

To put things in perspective, here are those same numbers compared to the longest run of uninterrupted job creation - 48 months ending in 1990. 4 years into that recovery, it was obviously faltering. 

After strong initial gains, the late 80s recovery began to stall - as measured by the annual drop in unemployment rate. The last couple of years of that run saw drops of just one-tenth of a point from the previous year.

As previously mentioned in this blog, by the time the September job numbers come in, this recovery should set a new record for months of uninterrupted job growth. 

Next year's year-over-year drop in unemployment rate won't be 1.4 percentage points. This recovery - like the ones before it - will start to level out. The good news is that at this rate it will take probably a year - perhaps even 2 to 2 1/2 more years - before it does.

No comments: