Unemployment falls but that likely means a Fed rate hike

On the state level, Georgia’s seasonally-adjusted unemployment rate for October checked in at 5.2 percent, which is actually up from the 5.1 percent rate the state posted back in September. The big surprise was the drop in the unemployment rate from 4.9% to 4.6%. Their unemployment rate fell to 4.9 percent, the lowest since February 2008. The majority of the new jobs went to white dudes-the employment rate for women and teenagers stayed pretty much the same, NPR reports. It actually fell slightly for prime-age workers (ages 25-54), from 78.2 percent to 78.1 percent, although it is still 0.7 percentage points above its year ago level. However, the sharp decline was partly due to people leaving the labor force, the employment to-population ratio (EPOP) was unchanged at 59.7 percent.

With the labor force shrinking in October and November, some economists believe that trend largely has played out, keeping the Fed on track to lift rates this month. With the USA economy near full employment, substantial monetary stimulus is likely to boost inflation. Economists had been watching to see if the relatively low unemployment rate would be pushing employers to raise wages, NPR’s Yuki Noguchi reports. Wage gains had been accelerating this year as competition for workers intensified. Wage gains were also depressed, falling to 2.5% from 2.8%.

Nonfarm payrolls have increased at an average rate of 180,000 a month so far this year, a healthy pace but below the 229,000 rate since in 2015. The rise in employment involved gains across various sectors of the economy: construction added nearly 20,000 jobs, health care or social assistance jobs increased by 35,000, and another 63,000 professional jobs were created. Hiring for seasonal jobs, on the other hand, means fewer people on the sidelines.

Almost every economic report since November’s election has pointed to accelerating growth – the key reason why the Fed is considered certain to raise short-term interest rates this month.

Regardless, analysts agree that while there are some questions in the employment data, there is nothing worrisome enough to prevent the central bank from raising the key interest rate this month.

Nick Colas, chief market strategist at Convergex, based in NY, said the nonfarm payrolls growth is in the “sweet spot” and puts a December rate hike in focus. Better employment prospects may draw more people into the workforce or limit unemployed Americans from giving up and dropping out.

Overall, Chris says, this report isn’t likely to change the Federal Reserve’s planned course.

“Absent a truly unexpected event between now and mid-December, the Federal Reserve is virtually certain to raise interest rates for the first time in a year”, Hamrick said.