As the jobless rate falls to 3.9 percent, economists wonder how low it can go.
But the economy has changed a lot since the late 1990s
The last time the unemployment rate fell below the 4 percent threshold was in 2000, during a period of frenetic activity remembered as the dot-com boom.
Nine years into a sustained, if less feverish, economic recovery, that milestone has been achieved again.
The Labor Department said Friday that the jobless rate in April fell to 3.9 percent, raising anew the question of just how tight the labor market can get, and for how long.
In the past half-century, only the late 1960s brought an extended period when the rate stayed below 4 percent.
“We’ve continued to add jobs routinely every month for so long, and the unemployment rate we have reached is amazing,” said Catherine Barrera, chief economist of the online job site ZipRecruiter.
President Donald Trump crowed about the landmark on Friday, tweeting, “4% is Broken!”
The steady-as-she-goes economy has produced a record 91 straight months of job growth. That may represent a healthier foundation than the dot-com era, when pride — or, as it was branded, “irrational exuberance” — went before a fall.
But the banner number announced Friday did not resolve any of the broader questions that economists have about this unparalleled run.
The most prominent is a mystery that has proved impervious to easy explanation: why wage increases haven’t been more robust, when the market continues to edge toward full employment.
Friday’s report showed that hourly earnings went up by 2.6 percent over the past year, not much faster than inflation. The subdued wage gains eased the prospect that the Federal Reserve would accelerate its plans to raise interest rates, helping to send stocks higher. But lagging pay also reflects how the economy of 2018 is fundamentally different from earlier eras.
“A 3.9 percent rate today doesn’t suggest as tight a labor market as 3.9 percent in 2000 or 3.9 percent in the late 1960s,” said Ellen Zentner, Morgan Stanley’s chief U.S. economist.
The share of working-age women in the labor force began to fall in 2000, after increasing for decades. Men have been dropping out for much longer. The upshot is that a smaller share of people are participating in the labor market, and it’s easier to get low levels of unemployment when fewer people are vying for jobs.
The population is also older than it used to be, on balance. The baby-boom generation has moved steadily toward retirement over the last two decades. And those still working have not helped push wages up. Generally, workers climb the economic ladder fastest when they are young, and so an older workforce may weigh on average wages, economists say.
The tech explosion of the late 1990s gave rise to lucrative roles in companies based on new business models. The share of the economic pie going to workers rose steadily for the first time since the 1970s — a feat not repeated since.