By , October 31, 2014
It seems the Federal Reserve is finally starting to recognize that the decline in the employment participation rate could be more structural in nature. The rhetoric this week displayed a bit more of a hawkish tone suggesting that the labor market may not have as much slack as previously thought. Unemployment claims have been back to pre-recession levels for a while and the unemployment rate has plummeted faster than anticipated.
The metric going forward to watch is wage growth. Even though the economy is generating consistently more than 200,000 jobs per month, wages have remained below average since 2008. The rumors of a “skill gap” among workers seems to be starting to manifest in the actual data. The Federal Reserve has been criticized by some for being behind the curve in raising rates to avoid inflation. If unemployment continues to fall, we could see acceleration in wage growth as more companies compete for talent, which may influence the Fed to start raising rates sooner than the market is currently expecting.
Source: Thomson Reuters Eikon
Other posts from
April 24, 2017
April 24, 2017
The start of the year saw a continuation of positive returns in the first quarter as global markets speculated on a spark in world growth initiated by the election of Donald Trump in the United States. Trump’s unique background and style suggested that the new president would be able repair some of the historically wide rift that has separated Republicans and Democrats.
January 12, 2017
During the first quarter, U.S. equities continued the strong advance experienced during the fourth quarter of 2016.
For the three months ending March 31st, the Dow Jones Industrial Average posted a 4.6% gain while the S&P 500 Index rose 5.5%. The stock market has been resilient due to robust corporate earnings as well as employment growth and positive economic data which have undergirded this upward advance.
Equity markets finished 2016 on a high note as markets rallied on a shocking surprise in the U.S. election. The election of Donald Trump for President of the United States was the most recent example of “low probability” events actually occurring and disrupting markets. This happened a few times in 2016, but none so dramatic as the Trump victory.