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The Unemployment Picture Won’t Budge

Unemployment and jobs numbers have been a focal point of financial news since the Great Recession, and for good reason.

And lately, there have been a lot of headlines about “news” for the labor market.

For instance, the headline unemployment rate for the U.S. is now 6.7%, down significantly from a crisis-era peak above 10%. Furthermore, there is a big debate about whether unseasonable weather is actually masking positive jobs reports and that the improvement is even more dramatic than some think.

But here’s the thing: Our labor market has been surprisingly consistent since the Great Recession. And not much has changed at all regarding unemployment trends in the past four years or so.

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Consider this chart, which shows both separation (that’s people quitting) and hiring trends stuck in roughly the same range for the last three years, according to the Bureau of Labor Statistics.

In other words, turnover in the economy is about the same as it has been since the initial shock of the Great Recession and financial crisis dissipated. 

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New job creation shows a very similar trend of stability. We are consistently running at a pace of about 2.1 million jobs a year, squarely within the long-term range according to a recent New York Times article. And while there is short-term volatility in the numbers, the long-term trend is remarkable reliable — as illustrated by this graph.

So what does this stability mean? Is steady job growth a good sign … or is steady job growth disappointing because we have a long way to go?

A little bit of both, as it turns out.

As Matt Busigin of the CFA Institute recently wrote in his “Dispassionate Analysis of the Employment Situation,” the labor market might not be as bad as some claim. And the sustained improvement is noteworthy.

However, the hole we had to dig out of was a big one, and improvements are slow-moving … meaning by Busigin’s calculations, we still are roughly two-and-a-half years away from full employment. (Full employment isn’t a zero percent jobless rate of course, but simply a low enough level where there is liquidity in the job market for employers to find good matches but not so much labor supply that folks who want a job can’t find one.)

So if you’re reading a lot into recent jobs numbers, take a deep breath and relax.

The truth is that we’ve come a long way and have a lot to be hopeful about…

But we also have a long way to go.

That means no single jobs number — weather-skewed or no — will make or break the economy.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP

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