Good news for the American people: recent data shows a decrease in unemployment levels in 298 of America’s 388 major cities, and in most states.
The U.S. unemployment rate in May was 4.1%, and the jobless rate was below 3% in 57 cities, and above 10% in only two, which makes for an extraordinary improvement overall across the nation.
The job situation in several “rust belt cities,” which were badly damaged by The Great Recession, have also mostly rebounded. The unemployment rate in the Detroit area is down to 3.9%, for example. This is considerably better than what the situation suggested in May of 2016.
However, there is a dark side to this dramatic improvement, economists warn.
“Our findings suggest that the labor market has already slightly overshot full employment,” Goldman Sachs economist Daan Struyven said in a report.
In economic terms, full employment is when all available workers have jobs, and current full employment levels have reached 4.6%, which experts are calling an overshoot of 0.3%. The remaining unemployed individuals are out of work for what economists call “frictional reasons,” or because they’ve just entered the job market or are in-between jobs — much like the 2.7 million workers who left their jobs voluntarily in 2015.
Over-employment may not seem like a bad thing, but it can signal the top of the labor market and mean a downturn is not far behind. The Federal government generally begins tightening conditions so growth doesn’t get out of control, according to CNBC.
One big issue noticed by the Bureau of Labor Statistics is that wages have not increased at the same rate as employment, barely increasing among hourly employees by 2.5% over the course of a year, and it may be falling.
Struyven states, “Goldman estimates the long-run sustainable employment rate is 4.5%, still above the current rate.”
But he notes that the uncertainty in that forecast is “large.”
Only time can reveal what exactly overshooting full employment means for the U.S economy and if a downturn will appear in the future.