Today’s blog post is a quick comment on the employment report that was released this morning. If you would like more detailed analysis on economic events, you can sign up for my Economic Commentary by clicking on the “Sign Up” section on the right side of this posting (near the bottom).
By now, you have probably seen the headlines announcing that the nation’s unemployment rate fell from 6.2% to 6.1%. Sounds like good news right? When we look behind the headlines we see that the news is actualy fairly disappointing.
First, you may be wondering who actually reports on the nation’s employment situation. An answer of “the government” is a bit too vague. The agency of the U.S. government that reports on the nations employment situation is the Bureau of Labor Statisics (BLS) which is part of the Department of Labor.
In analyzing the BLS report, what we see is that the unemployment rate fell primarily because people stopped looking for work and dropped out of the labor force. What we also discover is that the only category that saw a true improvement in their unemployment rate is the category of people who have less than a high school education. All other educational categories actually saw their unemployment rate rise. Here are the details:
Less Than a High School Education: dropped from 9.6% in July to 9,1% in August;
High School Education: rose from 6.1% in July to 6.2% in August;
Some College or 2 year Degreee: rose from 5.3% in July to 5.4% in August;
Bachelors Degreee or Higher: rose from 3.1% in July to to 3.2% August.
The actual number of jobs added was also a disappointment compared to the forecasts. The median foreast from over 90 economists surveyed by Bloomberg was for an increase of 230,000 jobs. What we got was 142,000 new jobs added. Keep in perspective that 142,000 new jobs is still a positive number; just far less than forecast.
The bottom line from the employment report is that the nation is still creating jobs and today’s report will do nothing to change the Federal Reserve’s time frame for when they will begin raising interest rates. Those who were arguing that the Federal Reserve was going to raise rates sooner than their original estimates will undoubtedly be disappointed by the employment report. The Federal Reserve has stated that their decision on when to raise interest rates will depend on the economic data. Most members of the Federal Reserve’s Open Market Committee have indicated that, based on current economic trends, mid-2015 is the most likely time frame for the first increase in short-term interest rates. Today’s report does nothing to alter that time frame.
Steve Scranton is the Chief Investment Officer and Economist for Washington Trust Bank and is a CFA charter holder with over 30 years of investment experience with equities, tax-exempt and taxable fixed income securities. Steve actively participates on committees within the bank to help design strategies and policies related to client and bank owned investments. Steve also serves as the economist for the Bank and has been a featured speaker for both client and professional organization events throughout the Northwest.