What Job Growth Means to You and the Economy

Investment Strategy

What Job Growth Means to You and the Economy

When more people enter the workforce, the job market grows and everyone wins. Here are six reasons why.

December 8, 2015

Many Americans don’t think about the job market until they’re sending out resumes. But as a primary measure of the country’s economic health, the job market and its data seep into our daily lives in countless ways large and small.

On the larger end of the spectrum, the Federal Reserve, the nation’s central bank, is looking to jobs data to help determine when to raise interest rates, another widely watched and impactful figure.

The Great Recession is a stark example of a weak job market and the impact it can have: 8.8 million lost jobs, according to the Bureau of Labor Statistics, which led to skyrocketing unemployment and contributed to the derailment of the nation’s economy and financial system.

As jobs grow and recovery from the Great Recession continues, here are six ways you and the economy benefit from a strong job market.

  • Higher wages – When jobs are plentiful but qualified applicants aren’t due to falling unemployment, businesses normally raise wages to fill positions and retain current employees. With fewer job openings, wages don’t grow as quickly or at all.
  • Improved consumer confidence – With a steady job and more money in their paycheck, who wouldn’t be more optimistic about the state of the overall economy or their own personal finances?
  • Spending growth – A confident, paycheck-collecting consumer is more likely to spend more money. When consumer spending grows, businesses can grow.
  • Increased productivity – Businesses with more workers can produce and sell more goods and services, increasing revenue which can fuel additional growth and jobs.
  • Larger tax base –Additional paychecks allow all levels of government to collect more tax revenue to fix roads and bridges, hire additional teachers and maintain parks.
  • Lower welfare costs – With more people working, government-funded social-service programs such as unemployment insurance, food assistance and Medicaid may have fewer claimants, lowering costs and freeing up funding for other programs. Better, more efficient service could result from having a smaller group of claimants.More jobs create a virtuous cycle of growth and a stronger economy. Contact your financial advisor for more information on this and other factors that may impact your portfolio.

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