A bi-weekly publication from Consultiva Internacional, Inc. (Registered Investment Adviser)
The U.S. November jobs report seems to have marked a turning point in the economy after a 9 year recession and recovery period. The unemployment rate fell to 4.6% and employers added another 178,000 jobs. The last time it was this low was August 2007 (see Graph I below), a date that is clearly pre-recession. These figures are consistent with what economists consider full employment, and after sell-off that began with Trump’s victory in the elections, bond markets are now priced to reflect a return to more normal interest rates. This seems to have primed the Federal Reserve who will most likely raise interest rates when the policy committee meets this week. However, a recent New York Times article suggests reading between the lines, as the jobs numbers are more uneven than the drop in the unemployment rate would suggest. Part of the decline was caused by 226,000 people dropping out of the labor force, people who are neither working nor looking for work, a lingering weak spot in the United States economy. The combination of a low unemployment rate and a shrinking labor force implies that the economy will inevitably stutter, because to keep employment gains at that pace, more people would have to join the work force. The pool of officially unemployed is down to 7.4 million, the lowest since November 2007. To keep up that speedy job growth, employers will need to pull in people who don’t fit the definition of unemployed (those who say they want a job and have been actively looking for one) but who are able and willing to work, this includes immigrant workers or those who have been generating income through informal sectors of the economy. The incoming administration seems to be inheriting an economy largely healed from its trauma of the last nine years, and they will have most indicators pointing in the right direction. However, immigration, domestic business development, and labor policies will be hot issues in the next chapter of U.S. economic history. Hopefully it will be more boring than the last.
by Myrna Rivera, CIMA®
Founder & Chief Executive Officer
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