Unemployment may tick down to 5.5% for January. While the figure is worth a cheer, it remains far from the less than 5% number that signals a full recovery. The jobs part of the recovery from the Great Recession continues to drag.
Recent recoveries have been marked by several consecutive months during which the jobless rate was closer to 4%.
The unemployment rate was below 5% from December 2005 through November 2007. The same held true from July 1997 to August 2001, and through part of the second period the number dropped below 4%. As expected, these numbers tether to gross domestic product (GDP). From 1996 to 1999, GDP rose over 6% per year, and it reached that level again from 2003 to 2006.
Some anxiety about whether the jobs recovery can maintain itself links to worries about GDP. Fourth-quarter GDP rose only 2.6%, after an increase of 5.0% in the third quarter. Many economists have pointed out that slowing economic activity in Europe, Japan and even China will make it harder for U.S. GDP to expand. To do so, the American consumer will have to carry the economy on his shoulders, and ironically consumer spending relies on low jobless rates. Further, employment growth has been threatened as many U.S. multinationals that cut 2015 earnings forecasts. That has to do some damage to the job market.
The housing recovery also has slowed substantially in most large markets. In some cases, the trend even has reversed itself. Most Americans continue to rely on their houses as the primary portion of their net worth and to provide the comfort to spend more and save less.
Among the few factors that may drive unemployment down is the sharp drop in oil and gas prices. In a number of industries, this will improve margins and perhaps lead to job expansion. However, the drop cuts both ways. Oil companies and oil services companies have already begun to shed jobs. If the price of crude stays below $50, the layoffs will worsen.
If 5% unemployment, or less, is a critical mark of a full recovery, the U.S. economy is not even close.