US Job Creation Falters

Wednesday, 6 September 2017 12:05

The State of Texas ranks second behind California in terms of its contribution to national GDP. Texas has recently been battered by a major storm, Harvey, which has caused extensive flooding in Houston and elsewhere in the state and resulted in damages with estimates running into the hundreds of billion Dollar level (frankly, it still too early for a proper assessment). However, it is likely that the disruption caused by the storm will hit both the state and the nation’s economic output somewhat.

The Federal Reserve is still working towards its goal of normalising interest rates towards their long-term average value by a series of incremental rises. The idea of raising rates in this manner is to shield the economy from shocks, so a softly-softly, cautious approach is being employed. This year has seen two 0.25% increases in the interest rates and it has been planned that a third will ideally take place before years end.

The two facts stated above coupled with weaker than anticipated job growth data for August probably means that any Fed rate increase will be deferred to later in the year. The job creation figure for August came in at 156000, missing expectations of between 175000 and 185000 new (non-farm) jobs. The job creation figures for July were also overstated and have been revised down from 209000 to 189000; similarly, the June figure was trimmed from 231000 to 210000. As a consequence of this, the unemployment figure has edged up from 4.3% in July to stand at 4.4% for August. However, an unemployment level below 5% is widely regarded as “full employment”, so perhaps the Fed may take a more Bullish stance if damage estimates from Texas prove to be overstated.

Weekly earnings have continued to increase at an annualised rate of 2.5%, a level that has held steady since April.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

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