The jobs report gave the Federal Reserve just the right balance to keep the pressure (as well as interest rates) low.
Though weaker than forecasted, non-farm payrolls are still solid – up 209,000 last month. And the unemployment rate hit 6.2%, thanks to workers who feel more confident about jumping back into the job market.
Don’t let there be any confusion, though… we still have a long road ahead. Of the 12 indicators that Federal Reserve Chairman Janet Yellen used, only half are back to where they were at the downturn. The trek to full recovery, therefore, still has a ways to go, according to John Canally, LPL economist.
For instance, while manufacturing payrolls were up for the 12th month in a row, most of the gains were in the services sector…
And even though July was the sixth-straight month that employment expanded by more than 200,000 people, the average hourly earnings rose by only a penny. That means the annual rate of increase is a mere 2% – well below levels that make Fed officials nervous.
Wages Up to Keep the Pressure Down?
But of the economy’s problems, wages are the biggest challenge right now. And there’s a typical pattern seen during the recovery phase…
As Jason Furman, Chairman of White House Council of Economic Advisors, puts it, “What you generally tend to see is that, first, you get your unemployment rate down, and then the greater tightness in the labor market starts to put some upward pressure on wages. Over the last year or two, we have seen faster wage growth, but it’s still nowhere near the wage growth that we need.”
The report unveiled other concerns, too. It showed more long-term unemployed and a longer wait time for Americans looking for jobs (right after reaching its five-year low back in June).
Though we may be on the right path, we certainly haven’t climbed all the way out yet.
In pursuit of the truth,
Politics Research Team