JOB GAINS PAVE WAY FOR FED HIKE
U.S. adds 178,000 positions
Another solid jobs report means it is all systems go for the Federal Reserve to raise interest rates — and though the unemployment rate has plummeted to lows not seen since before the recession, questions remain about gaps in the labor market.
“If they didn’t (raise rates), they’d look really foolish,” said Nariman Behravesh, chief economist for IHS Markit. “It’s a fairly strong report.”
U.S. employers added 178,000 jobs last month, The Labor Department announced yesterday, stoking expectations the Fed will raise rates when it meets in two weeks.
The Fed had been close to raising rates in September — three officials voted to hike — and will likely move later this month.
That would be the first time the central bank has raised rates since last December. At the time, the Fed said it expected to raise rates as many as four times in 2016, but a mixture of volatility in foreign markets and some poor data about the U.S. economy kept pushing hikes down the road.
“This positive jobs report is another indication that the U.S. economy continues to pick up steam,” said Tony Bedikian, managing director and head of global markets at Citizens Bank. Bedikian said markets have been expecting a rate hike, and nothing about yesterday’s report will change that.
The unemployment rate fell to 4.6 percent, the lowest it has been since August 2007.
While symbolically important, the unemployment rate dropped in part because some unemployed people stopped looking for work, apparently giving up on their prospects of finding a job.
Economists are also questioning why wage growth has been subpar with unemployment so low. Wage growth is about 2.5 percent compared to a year ago, below the roughly 4 percent that would be expected from this level of unemployment.
“There is this nagging question about why it is at full employment, wages are only growing at 2.5 percent,” Behravesh said. “There is still a fair amount of slack out there.”
The percentage of men between the ages of 25 and 54 years old who have jobs remains far below pre-recession levels. And though wage growth for highskill jobs has begun to increase, low-skill jobs have seen close to zero wage growth.
President-elect Donald Trump announced a new advisory group of CEOs yesterday that will offer advice on how to create jobs and spur economic growth. The panel will include Mary Barra, chief executive of General Motors, Jamie Dimon, chief executive of JPMorgan Chase and Bob Iger, chief executive of Disney.