Federal Reserve Chairman Ben Bernanke saw green shoots in the U.S. economy more than two years ago. The labor market may at last be growing roots to match. Nonfarm payrolls swelled by a larger-than-expected 244,000 in April, according to data released on Friday. That makes three consecutive months of solid gains.
If the current pace of job creation continues, it will still take two years and five months just to win back the remaining 7 million of the 8.7 million jobs lost after the U.S. recession began in December 2007. But that’s a significant improvement on the 39-month timetable based on the pace of job growth two months ago.
Moreover, the latest jobs figures hold out a glimmer of hope for those hit hardest — workers who haven’t held a job for 27 weeks or more. In April, their ranks thinned by nearly 300,000 and they represented a smaller share of all unemployed workers. If the trend continues, that’s good for them and also reduces the potential social and economic damage from long-term joblessness.
It’s important not to overstate the gains. Many Americans are still struggling amid a sagging housing market and relatively high unemployment, despite the extraordinary stimulus thrown at the U.S. economy. But the data do suggest that recovery is steadily taking hold. The news lifted the gloom that had settled over global financial markets, putting an end to the tailspin on Thursday and early Friday. The price of U.S. oil has stabilized at around $100 a barrel. Silver, meanwhile, was finally able to catch its breath after its free-fall earlier in the week.
The data should also give Bernanke’s Fed something to chew over. The central bank is not expected to raise interest rates until next year. But with its latest massive bond-buying program due to end next month, the U.S. central bank also needs to think about beginning a reversal of that effort by trimming its $2.7 trillion balance sheet. If the labor market keeps improving, that will add to the urgency by making it even harder for the Fed to continue arguing it isn’t throwing fuel on the inflationary fire. Bernanke may need to sharpen his pruning shears in a hurry.