The annual unemployment rate is projected to fall below 5 percent next year for the first time since 2007, as the U.S. economy grows at its highest rate in a decade, according to University of Michigan economists.
"Labor market conditions are improving, wage growth is picking up again, vehicle sales are booming, and the housing market is continuing its recovery," says Daniil Manaenkov, an assistant research scientist at U-M who helped compile the forecast.
Manaenkov says the national economy will add 4.7 million jobs over the next two years — 2.4 million jobs in 2016 and another 2.3 million during 2017 — after gaining nearly 3 million jobs in 2015.
The researchers say unemployment will continue to fall from last year's rate of more than 6 percent to 5.3 percent this year, nearly 5 percent next year, and 4.6 percent the year after.
Manaenkov says construction of both single-family and multi-unit housing will continue to rise from a million units last year to more than 1.1 million units this year, more than 1.3 million next year, and 1.5 million the year after. The researchers also say sales of light vehicles (cars, SUVs, and pick-up trucks) will stabilize at their September-October pace, averaging 17.4 million sold this year, 18 million next year, and 18.1 million the year after.
While U-M economists also predict positive growth for the U.S. economy, despite slowdowns in other global markets.
"The turmoil in financial markets earlier this year served as a reminder that the United States is not insulated from economic events in the rest of the world," says Aditi Thapar, an assistant research scientist at U-M. "Over the past year, several of our trading partners experienced weakness in their economies, prices for a wide range of globally traded commodities declined sharply, and the dollar appreciated substantially — which, along with the ongoing collapse in oil prices, reduced inflation and adversely affected net exports."
To view the full forecast, click here.