Despite a jump in business and consumer confidence since the election, some of the facts on the ground have been weaker. To spur on faster economic growth, that confidence needs to result in action. Fortunately, this morning’s jobs report suggests that it is.
Let’s start with the numbers:
Again, the news is good. What we should expect if the economy continues to improve is, in fact, exactly what we are already seeing:
In other words, the data is entirely consistent with an economy approaching normal status. Normal, remember, is what we’ve been trying to get to for years, and as the Fed’s recent minutes essentially said, we’re pretty much there. This jobs report confirms that assessment.
In the year ahead, then, we can probably expect to see these trends continue. Companies will create jobs, but they will have a tougher and tougher time filling them. They will be forced to raise wages and hire more marginal candidates, expanding the labor force and increasing spendable income. Those people, in turn, will become more confident and go out and spend.
In short, everything we have seen so far, but at an accelerating pace.
The concern here is that the improvements, both in confidence and in the facts on the ground, won’t translate into actual growth. This is a real risk, and one we have seen repeatedly over the past several years. Still, signs are good that recent increases in confidence—and the fact that wage growth is finally breaking out—may bring on the economic acceleration we’ve been waiting for.