The data in the July employment report were not only uniformly strong in their internal components, but the prior month’s jobs data were revised upward, ruling out the risk of a recession in the near-term.
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That suggests we may be in what’s often called a “Goldilocks economy”, when the economy is not too hot and not too cold – but just right.
The nation’s economy added a forecast-crushing 255,000 jobs in July, the Labor Department said Friday in a report that bolsters Democrat Hillary Clinton’s presidential campaign and may set the stage for the Federal Reserve to boost interest rates this fall. Atlanta Fed President, Dennis Lockhart waited for the report to come in before making a statement. He still thinks that the situation is very ambiguous but he does foresee conditions when the firm can offer interest rate hikes. Average hourly earnings, which have been slow to rise, ticked up slightly, by 0.3% from June to July. The unemployment rate for July remained at 4.9%, while the labor force participation rate crept up 0.1 point.
Meanwhile, more than one 2016 hike is also unlikely given that domestic and global political risks may continue to unsettle financial markets, with a number of important and outcome-uncertain political events ahead on the 2016 calendar.
The recent strength in employment adds to the growing list of economic data that suggest the US can weather the global economic storms raging around the world, from the persistent slowdowns in China and Japan, the post-Brexit volatility in Europe and weakness in other global economies. Strong employment numbers along with economic growth suggest that the growth might lag. He also says he might still prefer no rate increase at all this year until he sees inflation rising above its current low level.
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Still, Fed officials will continue to harbor concerns about the health of the economy. This has led to an increase in financial stocks of banks and brokers.
