Good News For Jobs?

As Independence Day rolls along, the job market is just as jubilant as you are. The unemployment rate is set to report this Friday, July 6th. As a reminder, the unemployment rate is the ratio between the number of individuals who do not have a job—but are looking—over the total labor force. The rate that is reported is the value of the previous month. So, this report is as of June, 2018. That being said, Estimize predicts that the unemployment rate will stay the same: at a low 3.8%.

The low unemployment rate is a strong indicator of the US economy’s success. However, there is a potential downside. The Fed conducts its monetary policy with an expectation that the unemployment rate will be around 4.5%. If the unemployment rate becomes too low, that might seem like a good thing, but it actually can cause a labor shortage in the market. With a labor shortage, businesses would have trouble hiring new workers and maintaining low prices. This 3.8% is not too concerning, but may indicate a dangerous trend of the rate becoming too low. Overall however, the prediction is likely accurate and is a good one for the US economy.

On top of that, Estimize predicts Nonfarm Payrolls to increase by 206k in the month of June. Nonfarm Payrolls indicate how well the economy is doing by reporting the number of jobs added in a given month. May had an increase of 223k jobs, which is higher than the predicted June increase. This is not unusual as the number fluctuates every month.

Finally, average hourly earnings are predicted to increase by 0.2% over the previous month. This is the one employment metric that has been lagging, but as the labor market continues to tighten companies will be forced to pay more in order to retain employees.