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Wall Street to Your Street
Unemployment Drops to 9-Year Low
December 5, 2016 | Russ Swansen, Chief Investment Officer
The U.S. unemployment rate dropped to 4.6% in November – the lowest level since August 2007 – according to the U.S. Department of Labor, Bureau of Labor Statistics Employment Situation report issued Dec. 2 (Exhibit 1).
We believe the declining pace of job growth is the natural result of the drop in the unemployment rate over the past few years from about 10% to the current rate of less than 5%.
The Federal Reserve board has said it considers a rate of about 4.8% to be full employment, so at 4.6%, the current rate would be considered full employment.
However, not all the labor news was positive. The average hourly earnings declined by 3 cents to $25.89 for all employees on private nonfarm payrolls. That follows an 11-cent increase in October. Year over year, average hourly earnings have risen by 2.5% (Exhibit 3).
Here are some of the other key trends noted in the report:
- The number of unemployed persons looking for jobs experienced one of its largest drops in years, declining from 7.8 million to 7.4 million for the month. While new hires contributed to that decline, much of the drop also resulted from people leaving the workforce.
- The number of long-term unemployed (those jobless for 27 weeks or more) declined only slightly from 2 million to 1.9 million, and remains at an elevated level (Exhibit 4).
- The labor force participation rate for those in their prime working years (age 25 to 54) declined slightly from 81.6% to 81.4%, which is about 1.6% below the prerecession level (Exhibit 5).
- The average workweek remained the same at 34.4 hours, which is in a range comparable to that preceding the last recession (Exhibit 6).
- The number of job losers and persons who completed temporary jobs declined by 194,000 to 3.6 million in November.
- The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), was at 5.7 million, which remains high and was little changed in November, but was down by 416,000 over the year (Exhibit 7).
- Initial jobless claims, reported weekly, remained at a very low level (Exhibit 8).
The low unemployment rate of 4.6% along with solid retail sales figures in recent months will likely influence the Federal Reserve’s decision whether or not to raise the fed rate.
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Media contact: Callie Briese, 612-844-7340; firstname.lastname@example.org
All information and representations herein are as of Nov. 30, 2016, unless otherwise noted.
The views expressed are as of the date given, may change as market or other conditions
change, and may differ from views expressed by Thrivent Asset Management associates.
Actual investment decisions made by Thrivent Asset Management will not necessarily
reflect the views expressed herein. This information should not be considered investment
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