Is This the Peak?


What happens when things are as good as they get?

That’s what many people must have been wondering when the April jobs report was released early Friday morning. The U.S. economy added 164,000 jobs, the unemployment rate fell below 4% for the first time since December 2000, and average hourly earnings rose by only 2.6% on an annual basis.

There was far too much hand wringing about the employment figures, which were below economists’ projections. Yes, it was a little short, but the average job creation for the last three months topped 200,000.

But that missed the entire point: At 3.9% unemployment, the economy is at full employment.

Yes, there are still a lot of people out of the labor force, but retirements, disabilities from drugs or injuries, millions of ex-cons and parolees, and people who just don’t have 21st Century job skills have kept the workforce participation rate low.

With employers across the country practically begging to fill thousands of open positions, that sure sounds like full employment to me.

But even with that, wages rose by far less than economists projected, tamping down fears of inflation. The ten year Treasury note yielded 2.95% at the close—below the magic 3% number—and the Dow Jones Industrial Average rallied 332.36 points Friday.

So, is it too good to be true?

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