Jobs Report—Not Yet Full Employment

Popular Economics Weekly

The unemployment rate rose slightly to 5 percent for the first time since April, the government said Friday, though that was mainly because 444,000 people entered the labor force. There are still too many unemployed, in other words. A broader measure of unemployment that includes people who gave up looking for work or can only find part-time jobs was unchanged at 9.7 percent. And it was at 8 percent before the Great Recession.


Graph: Marketwatch

Some 3 million people have jointed the labor force in the past year, a clear sign that record job openings and steady hiring are enticing more Americans to seek work. An increasing number of companies even say they have trouble finding enough skilled workers. But there are still more than 7 million that have either stopped looking or can’t find full time jobs.

This is while total employment gains for August and July were 7,000 lower than previously reported in revisions. The government said 167,000 new jobs were created in August instead of 151,000. July’s gain was trimmed to 252,000 from 275,000.

The U.S. has added an average of 178,000 jobs a month this year, down from 228,000 in 2015 and 251,000 in 2014. Hiring was expected to taper off as it usually does when an economic expansion reaches maturity and the pool of jobless workers shrinks.

But the inflation hawks will now cry louder that it’s time to raise the Fed’s short term rates from 0.5 percent—because wages are now rising at 2.6 percent per year, though that isn’t enough to raise the inflation rate. In fact, it hasn’t been enough to raise economic growth, either, which is projected to remain in the 2 percent range this year as it has been for the last 2 years.

So any boost in the Fed’s interest rates will hurt growth by causing the US dollar’s value to rise against other currencies, which in turn hurts exports and so manufacturing, which barely expanding, according to the latest ISM manufacturing survey.


Graph: Econoday

The September ISM Manufacturing Index did bounce more than 2 points higher to a much better-than-expected 51.5, largely because the US Dollar has been weaker of late—due to the fact that the Fed hasn’t raise interest rate. So said higher growth isn’t assured.

New orders are the most important of all readings rose 6 points to a very solid 55.1. Export orders are respectable and steady at 52.0 while the draw in total backlog orders slowed, with this index up 4 points and nearly hitting breakeven 50 at 49.5. Production also improved in the month, up 1.4 points to 52.8, as did employment which, at 49.7, is also nearly at 50. This is a positive report, pointing to rising though no more than moderate strength for the nation’s factory sector.

But alas, beware of those inflation hawks if we want higher growth, and fuller employment for all who want to work. There are two reasons for the Fed to keep interest rates low. Firstly, the energy sector is just beginning to recover from its mini-recession, as crude oil prices inch up to $50 per barrel. And European bond prices are negative with the EU in trouble with Brexit, which means the European Central Bank has to remain in an easing mode. So let’s give this economy a chance to really grow before beginning to raise the all-important Fed funds and overnight rates.

Harlan Green © 2016

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About populareconomicsblog

Harlan Green is editor/publisher of, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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