Unemployment Hits 9 Year Low
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The nation's unemployment rate dropped to 4.6%
in November. The lowest level since the recession
and 178,000 jobs were
added to the economy. Now all eyes turned to the Federal Reserve
and whether it will raise interest rates in December.
Joining us to discuss is WSJ chief economics
commentator Greg Ip. Hi Greg, thanks
for being with us.
Hey Tanya.
So, this jobs report came on the heels
of an upbeat housing report this week
as well, is all of this enough for the Fed to make a move on rates?
Well, I would think so I mean as
as long ago as a month ago they basically were
in default mode that they were gonna go in December, unless the data
turned up to be bad. The data hasn't only been good it is actually been a little bit
better than expected, so I see very little to stand in the way of them
moving on that at their next meeting. Alright now, while the
jobless rate did dip to its lowest level in 9 years
wages have yet to return to their pre-recession levels
will that be a concern for the Fed?
It will be but I don't think it's enough of a concern
to stay their hand... the wage numbers were a little bit troubling
in this report we saw a 0.1% monthly decline
the annual rate dropped to 2.5% from 2.8%
in October but I would take ... have a
cautionary note before I would worry too much. There were quirks
to the calendar that caused the number to be overstated in October
and understated in November, so the real trend
on wages is still probably around 2.5% which is
a very modest acceleration from a few years ago
when you consider the fact that productivity growth is also extremely weak
2.5 to 3% is probably a...a
good approximation of the trend so I don't think there's anything here
for the Fed to worry about it too much.
And Greg in terms of who was hiring
most in December, which industries stood out to you?
Well, I think one of the notable gains
was in construction that's a positive sign it shows as you were talking about
the housing numbers the other day, that the residential construction sector
continues to be a very good contributor to overall economic
growth...a we also saw gains in government and
we saw gains in business services. On the troubling side
we saw retail employment drop. Now these numbers
are seasonally adjusted so what that's telling you is a...
while retailers are adding workers for the holiday season,
they're not adding them at the same pace as they have in previous years so that's a
little bit worrisome.
Absolutely. Are there any other economic
headwinds that you've see on the horizon that could potentially
slow down the growth we've seen?
Ah well, we certainly have a lot of uncertainty related
to the political situation but so far the market have liked
what they've seen from the Trump administration so that doesn't seem to be a big worry.
The dollar has gained a lot of strength since Trump was elected
partly because people are expecting fiscal stimulus,
higher interest rates, that stronger dollar could be a negative
for export industries and for manufacturing, which is kind
of ironic, considering the emphasis that Trump has placed on both
manufacturing and a ... and exports.
I would say the final point to keep in mind here
is that ... a the overall pace of job growth
continues to be very strong, much stronger than what the economy
can sustain in the long run given the fact that this is an
aging country and the Federal Reserve is basically
going to say: "we need to start moving interest rates back to normal
level because we still have a labor market that is hotter than it
can stand to be over the long term."
Alright. Graig Ip, thank you so much for that analysis.
Alright, Tanya, thank you.