Mary Walden: “Mike, rules of thumb are useful in many areas of life, but sometimes they can become outdated and in need of revision. What’s the rule of thumb today about the number of jobs that need to be created monthly, in order to lower the unemployment rate?”
Mike Walden: “Excellent question, Mary. In fact, it’s a question I often get when I’m doing talks around the state about the economy. The long-term rule of thumb was 150,000 to 200,000 net new jobs a month, nationally. It was always stated, at least for the last 25, 30 years, that we had to create, in the country, somewhere between 150,000 and 200,000 net new jobs a month in order to lower the unemployment rate. This is really based on data from the 70’s, 80’s and 90’s.
But, in the 2000’s we had two big changes. First of all the population growth has been slowing so we don’t need to add as many jobs to account for new workers, and secondly, a lot of the baby boomers, who of course dominated the economy over the last 30 years are retiring and moving out of the labor force.
So, recently two Federal Reserve economist recalculated this rule of thumb, and they came up with a number that is much smaller. They came up with 80,000, indicating that as long as we can generate 80,000 net new jobs a month, we should see downward pressure on the unemployment rate.”