By: Russ Swansen, Chief Investment Officer, Thrivent Asset Management November 07, 2016
U.S. employers added only 161,000 nonfarm jobs in October, but the average hourly wage grew by 10 cents, according to the U.S. Department of Labor, Bureau of Labor Statistics, Employment Situation report issued Nov. 4.
October marked the third month in a row of sub-par job growth compared with the 2015 average of 229,000 new jobs per month. Employers had added 191,000 jobs in September (revised up from 156,000) and 176,000 jobs in August (revised up from 167,000 jobs). Through the first 10 months of 2016, employment growth has averaged 181,000 per month.
We believe the declining pace of job growth is the natural result of the drop in the unemployment rate from about 10% to the current rate of 4.9% over the past few years. At 4.9%, the economy is nearing full employment (which the Fed has defined as about 4.8%). Job growth, which had been growing faster than the population, has been trending down toward the growth rate of the working-age population.
Here are some of the other key trends noted in the report:
- The number of unemployed persons looking for jobs declined slightly from 7.9 million to 7.8 million for the month, but that was primarily a result of people leaving the workforce.
- The number of long-term unemployed (those jobless for 27 weeks or more) remained at the same high level – approximately 2.0 million Americans – which accounts for 25.1% of the unemployed.
- The labor force participation rate for those in their prime working years (age 25-54) experienced slight improvement. The rate inched up to 81.5% a month earlier, which was the highest level since 2012, but still 1.5 percentage points below the pre-recession level.
- The average workweek was unchanged at 34.4 hours, and remains in a range comparable to that preceding the last recession.
- The number of job losers and persons who completed temporary jobs declined by 218,000 from the previous month to 3.7 million.
- The percentage of people working part time who would prefer full time remained the same at 5.9%.
- Initial jobless claims, reported weekly, remained at a very low level.
The continuing growth of jobs in the economy is one of the key considerations for the Federal Reserve in deciding whether to raise interest rates. The Fed has already decided not to raise rates in November, but indicated that there was a possibility of a rate hike in December. We believe a small rate hike could be beneficial to net savers without adversely affecting the economy or consumer spending.
Media contact: Callie Briese, 612-844-7340; firstname.lastname@example.org
All information and representations herein are as of 11/07/2016, unless otherwise noted.
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management associates. Actual investment decisions made by Thrivent Asset Management will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.
Asset management services provided by Thrivent Asset Management, LLC, an SEC-registered investment adviser. Thrivent Asset Management, LLC is a wholly owned subsidiary of Thrivent Financial for Lutherans, Appleton, WI.
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