Job growth accelerated in December, as the economy added a much better than expected 200,000 jobs. The unemployment rate dropped to 8.5%, as the net flow of workers resulted in an improvement of 0.2% for the month.
Today’s report is another positive bit of evidence that the jobs market – and the economy as a whole – strengthened moderately heading into the end of the year.
While positive, it’s important to contain optimism about the outlook in the months ahead. The economy is still pushing forward, but many hurdles to further acceleration remain.
The recent momentum in the jobs market should provide a bit of a boost to consumer sentiment. Ultimately, that progress will need to be extended for several quarters to continue that momentum and eventually generate meaningful improvement in personal income.
In the short-term, better sentiment may spur consumers to continue to spend a bit more freely. There’s certainly a risk that spending growth will falter though in the absence of better growth in income. We should learn a lot more over the next few months.
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