|09-05-2014, 02:17 PM||#1|
U.S. economy targets best job creation stretch since 1997
The U.S. economy is aiming to extend its best streak of job creation since 1997, with a host of key economic events suggesting hiring remained solid in August.
Job openings are higher, layoffs are declining, and most industries are placing out for-help signs.
The U.S. economy has created at least 200,000 jobs each month for the last six, which is the first time that happened since 1997 when the U.S. hit the 200,000-plus seven times.
The last time an even better streak was in 1993-1995, when employment topped that mark for 19-straight months, during the early stages of what would become a tech and internet-driven economic boom.
In August, economists forecast a net gain of 220,000, compared with a preliminary 209,000 in July.
With all streaks destined to end, August’s initial estimate of job gains could fall short of forecast, and could even come below 200,000 for the first time since January.
Economists are weighing mixed signals for today’s report, so expect a lot of volatility when the figures come out, because not all market participants are expecting the same result.
The odds that hiring fell below expectations increased after payroll-processor ADP reported a 204,000 increase in private sector payrolls, which was less than consensus and the smallest gain in five months.
Still, other key indicators are pointing to an even stronger pace of hiring in August. Employment indices produced by the Institute for Supply Management are at or close to multi-year highs.
The combined quality of the ISM indices tends to correlate very closely with U.S. employment growth.
Still, August is a somewhat a tricky month to calculate hiring in, because historically, fewer households fill out their surveys compared to any other month. Over the past five years, the government’s first and third estimates of job growth have averaged a massive contrast of 77,000 in August.
Also, August is one of the months that have high swings during the summer in the job status of some employees such as auto workers or teachers, that can skew seasonal adjustments in the report, and although they could be significant, they are usually temporary.
As for unemployment, the rate has fallen steadily over the past few years, mainly because people are dropping out of the labor force. However, economists are now starting to believe faster job creation is the reason behind that fall.
Economists by Bloomberg expect the rate will drop back to 6.1% again in August after ticking higher in July to 6.2%.
The only downside for the recent run in job hiring is that it hasn’t trigger a notable increase in average hourly wages , and although the economy has witnessed a greater shift toward higher-paying jobs in 2014, a healthy job market pickup cannot start driving economic growth unless workers are earning higher, and spending higher.
Bear in mind that this is the last non-farm payrolls report before the Federal Reserve’s monetary policy meeting on September 16-17, when Chairwoman Janet Yellen is highly expected to lay out the conditions required for the Fed to start hiking interest rates.
Stock futures were lower ahead of the jobs report.
-Futures on the Dow Jones Industrial Average fell 0.299% to 17028
-Futures on the S&P 500 index fell 0.345% to 1990.90
-Futures on the NASDAQ 100 fell 0.129% to 4064.00 . As of 07:18 a.m. ET
U.S. stocks closed in the red Thursday. The Dow and S&P 500 both slid about 0.1% while the NASDAQ closed 0.2% lower.
10-year Treasury yield is hardly changed at 2.45%, and the U.S. dollar was barely higher against the euro than it was before Thursday’s announcement of fresh stimulus measures.
It will take a very strong number to send yields higher than that, taking in mind the ongoing scenery of global political tensions.
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