The U.S. unemployment rate is at an almost 50-year low. Companies increasingly say that workers are hard to find. So how much longer can hiring keep up the pace of the past several years?
The not-so-satisfying answer: It depends.
U.S. employers added an estimated 155,000 workers to nonfarm payrolls in November — a bit less than expected, but still enough to keep the three-month average at a respectable 170,000. The performance also extends the country’s longest-ever streak of net monthly job gains to eight years, two months.
Once upon a time, economists would have considered such a rate of job growth unsustainable. They estimated that the population of willing and able workers was increasing at somewhere between 50,000 and 100,000 a month, so they figured the unemployment rate would remain steady as long as employers hired roughly that number of people. If hiring stayed above that breakeven level, it would eventually exhaust supply.
By most measures, the U.S. should be getting close to that exhaustion point. Consider the share of prime-aged workers (aged 25 to 54) who have jobs. As of November, it stood at 79.7 percent, not far from its pre-recession average of 80.1 percent. Closing that gap would take almost 500,000 jobs — something that, given a breakeven level of 100,000 or less and monthly job gains averaging 170,000, could happen within a year.
The breakeven level, though, depends on a lot more than population growth. If, for example, people start retiring later, then more new jobs will be needed to accommodate the young folks just starting out. Or if abundant opportunities draw more people into the labor force, supply could keep expanding. For such reasons, some economists now think job growth of as much as 200,000 a month could be sustainable for quite a while. This might also help explain why wages haven’t been rising faster.
In short, the U.S. economy can’t keep generating this many jobs every month forever. But that doesn’t mean it has to end soon.