The Employment Market Has Progressively Expanded, Tightening the Labor Market
The employment market has steadily grown last year despite various unanticipated events that could have affected job expansion. In 2016, 2.2 million jobs were created allowing the unemployment levels to drop to its lowest level since 2007. The economy has generated 75 straight months of growth, which is the longest on record. The tightening labor market finally achieved accelerated wage growth as average earnings per hour increased 2.9% since December last year. The 2.9% increase is the strongest pace of wage growth since the expansion began. Rising wages have been the missing piece the current expansion and will enable households to increase consumption going into 2017, sustaining economic momentum and bolstering the retail sector.
Important Factors Causing Employment Momentum
December employment growth of 156,000 jobs moderated from the pace seen through much of 2016. Yet given the economy is approaching full employment, job creation above 100,000 positions per month is more than enough to match labor force growth. Professional and business services, together with education and health services combined for 52% of new jobs created during 2016. Both sectors benefit from demographic trends and emerging technology, which will continue into 2017. Also during 2016, these sectors decreased office vacancy down by 40 basis points to 14.4%. A sub 5% unemployment rate tempered employment growth despite the current 5.6 million job openings. In 2017 hiring could moderate as employers struggle to fill positions in a tight labor market, but this does not indicate any signal of economic slowing. Apartment demand supports this trend as 2016 absorption reached the third highest yearly total on record at 328,000 units, with prospects for 2017 remaining optimistic.