Normal On The Horizon

The economy is gaining strength. It is not yet normal, because a full world of zero interest rates is not normal, but at the least normal is somewhere on the horizon.

That's the major takeaway from the November jobs report released by the Bureau of Labor Statistics. A wide surge in hiring reached across sectors, from factories to offices, and increased overall employment by 321,000 jobs, exceeding even optimistic projections, according to Bloomberg. (1) The unemployment rate held steady at 5.8 percent, which is really a six-year low. Average hourly earnings climbed 0.4 percent, that is the largest monthly gain since June 2013. The common number of hours a member of staff worked each week is up too.

Nariman Behravesh, chief economist for HIS Inc., bloomberg.com/ told Bloomberg that the cycle of job growth and improved spending is a standard positive for the big economic picture. "You've got this really nice dynamic going on in that there's more jobs growth, more spending, stronger GDP growth, which in turn means more jobs being created," he said. (1)

More succinctly, PNC economist Stuart Hoffman told Forbes, "If you never like this one nothing is going to get you to happy." (2)

While we haven't gotten back on track yet, this report is strong evidence for optimism that we will get there prior to later. An accelerating pace of hiring in conjunction with rising wages and an unemployment rate that's falling, or at the least steady as more people enter the workforce, will be most of the justification the Federal Reserve needs to begin allowing interest rates to take up a slow climb toward reasonable levels.

That doesn't meant this Fed, which under the leadership of Janet Yellen is very gun-shy about acting too soon, will actually take its thumb off the interest rate scales as soon as it should. The Fed is apt to be particularly concerned by continuing weakness in Europe and China, and by the recent slide in oil prices when it is not reversed soon. These factors could subscribe to lingering hesitation to act.

The widely predicted mid-2015 target for raising rates still seems correct to many analysts, especially given this month's solid employment news. Much more likely than not, by this time around next year, savers who put their cash in money market funds or short-term bank deposits might actually get a little back due to their troubles.

Partisans on both sides of the U.S. political divide will credit themselves because of this recent improvement. Democrats will claim the strengthening economy as proof that the Obama administration has been right all along about the necessity to add trillions to the national debt to be able to put Americans back to work. Republicans will say so it was the return of a GOP majority in the House of Representatives in 2011 that finally put the brakes on Obama's spending spree, and that the recovery could have come even faster but also for the administration's regulatory overreach, especially in the banking sector. I personally fall into the latter camp.

But aside from who's right, the underlying the fact is that the United States economy, still the world's largest, is now picking right up speed. That's ultimately a good sign for workers and investors everywhere.