July 7, 2013
Still a Positive Outlook for Job Creation
While the outlook for job creation and lower unemployment rates has continued to steadily improve, some still doubt the pace at which these improvements are happening, and if progress can maintain its momentum. A recent Fortune article attempts to quell the fears of those who are understandably skeptical. After all, the Fed hasn’t been too optimistic in their outlook, although they do argue that the economy is indeed growing.
Fortune reports that the U.S. economy created 195,000 jobs in June, “more than most expected.” Further, the number of jobs created in April were revised upward in May, and unemployment has remained at 7.6 percent.
With interest rates rising, people are starting to wonder whether the economy will continue creating jobs. Doing so would raise borrowing costs “for everything from buying a home to investing in new office buildings and equipment at a time when the economy, while improving, is still relatively fragile.”
In its last meeting, the Federal Reserve hinted at the central bank could stop asset purchases by mid-2014 if the economy improves as expected. Recall, the Fed is currently buying $85 billion in Treasury and mortgage bonds each month split between mortgage-backed securities and ten-year Treasury notes.
However, even with rising interest rates, job creation shouldn’t slow, according to Paul Edelstein, economist with IHS Global Insight Since the Fed launched its third round of quantitative easing, known as QE3 in September, the economy created 1.7 million jobs, or about 190,000 jobs per month on average.
While the numbers aren’t staggeringly impressive, there is a silver lining. The pace of job growth has kept up with the nation’s growing population, and the rise in mortgage rates hasn’t derailed the recovery of the housing market. “This,” reports Fortune, “says a lot about the overall economy, since the vast majority of Americans’ wealth is tied closely to the homes they own.”
Nonetheless, unemployment numbers are better than expected. Businesses accelerated hiring in June, and the “lion’s share” of jobs were created in the hospitality and leisure sector, according to NBC News. U.S. stocks, easily influenced by the latest talk on Wall Street, climbed on Friday in response to the unexpected jobs report. The numbers not only indicate labor market strength, but also serve as a gauge for when the central bank will’s monetary policies begin to slow, according the NBC News.
Some investors predict that the Fed will keep alluding to policy tapering. According to Todd Schoenberger, managing partner at LandColt Capital, “We can expect the Fed to continue providing hints of tapering, while maintaining status quo with the current QU program…overall, this report is remarkably bullish for stock.”
Topics Related to This Post