Why are jobs surging amid such weak GDP growth?
It's a paradox that confounds and worries economists and markets: How can the U.S. have a robust growth in jobs and a tepid economic expansion at the same time? And if solid employment growth is just temporary, is a near-term recession on the way? Maybe not.
Much of the rest of the world is in rocky condition, and the U.S. stock market's slide thus far in 2016 reflects worries that foreign troubles will visit American shores. The domestic economy's recovery from the Great Recession is in its seventh year, so some believe it is overdue for a downturn.
Employment rose by 292,000 jobs in December, in keeping with a string of healthy showings. Nevertheless, GDP in 2015's third quarter grew at a lackluster 2 percent annual pace, in line with its previous performance. The International Monetary Fund estimated that overall U.S. economic growth last year was 2.5 percent, about the same as recent years' blah performances.
Owing to China's lower growth pace and tanking oil prices, courtesy of Saudi Arabia's willy-nilly crude production, much of the commodity-dependent developing world is reeling, as are the U.S. oil and manufacturing segments.
But there's a strong case that, because the U.S. job gains are in the service industries -- which make up some 80 percent of the economy -- the nation will remain in decent shape.
The good news in the U.S. is concentrated in the "relatively labor-intensive services sector, with the capital-intensive resources and manufacturing sectors struggling," noted Ian Shepherdson, chief economist at Pantheon Macroeconomics.
More broadly, according to economists at Barclays Capital, a robust record of employment growth does not historically do a quick reversal. Since 1960, a recent Barclays report said, "a slowdown in employment growth and a stable (or rising) unemployment rate has preceded every ... recession."
That's not the current situation. The U.S. jobless rate has fallen almost continuously, to 5 percent last month from its 10 percent peak in October 2009. The Barclays report pointed out that the employment growth average since 2010 is 189,000 jobs per month, yet over the past year and a half, it has averaged 243,000.
To be sure, some regard job numbers as a lagging indicator. And the official statistics omit the large cohort of people who have opted out of the working world. The most recent labor force participation rate -- the share of the economy's working population (ages 16 through 64) that's employed -- has fallen sharply over the past 10 years, to 62.6 percent from 66 percent. But this may not be as serious a problem as it appears to be. Many economists believe that half the drop is due to baby boomers retiring.
"There's really no economic data in the United States that's flashing a warning sign," said Mark Hamrick, senior economic analyst with Bankrate.com, a provider of consumer financial information. He downplayed the risk of the U.S. slipping back into recession this year, pointing to the healthy labor market and still favorable borrowing environment for consumers and businesses.
Still, he cautioned that the systemic economic conditions that lead to such downturns can be hard to spot. "It's a little like trying to predict if a car is going to hit you. It's the same with predicting a recession. You don't know if it's going to happen until it occurs. But right now, we don't see the signs."