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MarketWatch: Unemployment Rate May Fall to 3.8 Percent
Monday, November 16, 2015 6:45 AM

The current economic recovery has, by most measures, been slower and steadier than almost any that have come before, according to an article by Steve Goldstein on Marketwatch. On the one hand, this expansion has lasted 77 months—the fifth-longest since 1900. On the other, it’s taken longer than any recovery since World War II to reach the same growth in output, according to Minneapolis Fed data.

But David Kelly, chief global strategist at J.P. Morgan Funds, says the current recovery actually does resemble the others in one respect—the speed at which the labor market healed itself. He points out that, since 1960, each expansion has generated a decline in the unemployment rate of 0.7 percent per year on average. In this current recovery, the unemployment rate has dropped at a rate of 0.8 percent per year.

Kelly, in a note to clients, says this pace can be continued, all the way into April 2017. If he’s right, the unemployment rate will have fallen to 3.8 percent by then.

He points out the average trough rate of unemployment in the last seven expansions has been 4.5 percent, and the lowest trough has been 3.8 percent, back in April 2000. Kelly thinks that low of 3.8 percent is the rate at which the U.S. economy finally would generate a serious pickup in wages.

On the gloomier side, Kelly says 2017 is when there will be a serious recession risk. “It should also be noted that all major recessions in the last 50 years have been accompanied by a severe market correction or bear market and that stock market peaks tends to lead business cycle peaks by a few months,” he says.

There are more full-time jobs than before the Great Recession hit