WASHINGTON — Unemployment in the U.S. has dropped to a seven-year low of 5.5 percent — a level normally considered the mark of a healthy job market. Yet that number isn’t as encouraging as it might sound.
While U.S. employers added a solid 295,000 jobs in February, and the jobless rate fell from 5.7 percent, it went down mostly because many people gave up looking for work and were no longer officially counted as unemployed, the government reported Friday. What’s more, wage gains remained sluggish.
Those trends suggest that the job market, while improving rapidly, isn’t quite as healthy as it looks.
That complicates the Federal Reserve’s task of figuring out when the economy has strengthened enough to withstand higher interest rates. The Fed is considering a rate increase as early as June.
With Friday’s report, employers have now produced 12 straight monthly job gains above 200,000. It’s the longest such stretch since 1994-95.
The U.S. is easily outshining most other major economies. For example, the unemployment rate in the 19 countries that share the euro is 11.2 percent, or twice the U.S. rate.
A 5.5 percent unemployment rate is typically consistent with what economists call “full employment” — when the proportion of unemployed people has fallen so low that employers must raise pay to find enough qualified workers. Many economists argue the economy can’t be near full employment if wages aren’t growing. And average hourly earnings rose just 3 cents to $24.78 in February from the previous month.
Diane Swonk, chief economist at Mesirow Financial, said, “5.5 percent doesn’t mean what it once did.” Full employment “is always a moving target, and it has moved down.”
