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Lower Unemployment But Stagnant Salaries

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It’s time for some cold hard facts. The unemployment rate has been reduced to 3.9 percent – a new low since the end of 2000 after 6 consecutive months at 4.1 percent. The number of unemployed has decreased to 6.3 million workers, according to data from the Department of Labor of the United States.

The economy in the United States has created 164,000 new jobs, slightly below the estimated 195,000. The participation rate in the labor market has decreased to 62.8 percent from 62.9 percent, which has reduced the unemployment rate to 3.9 percent.

So what does the interest rate in the United States have to do with the increase in the salary of the workers?

There is an increase in the average salary per hour but not enough regarding the increase in employment

The average wage per worker hour has increased by only 0.1 percent, which leaves the annual rise in salaries of American workers at 2.6 percent. So for the moment the Federal Reserve does not have any additional pressure to accelerate the process that has begun monetary normalization.

The average creation of employment in the last quarter has been 207,000 jobs, above the 150,000 jobs needed to keep the unemployment rate at current levels.

The FED insists on maintaining interest rates in the range of 1.5 to 1.75 percent, since they consider that the price advance approaches the 2 percent target in the medium term and can thus at this pace with the eventual goal of monetary normalization.

Work growth is below expectations

The rate of job creation has been lower than expected by analysts, who had predicted the creation of 189,000 jobs, the reduction of the workforce has led to this decline in unemployment. However, the unemployment rate has reduced more than expected.

Job creation has also been lower than average the last 12 months – 191,000 new jobs.

The data is positive, since it has also meant a reduction in the  unemployment rate to 7.8 percent, which includes the discouraged unemployed who do not seek employment and part-time employees which indicates that the slack in the labor market is already quite scarce.

The decline in the labor force causes a lower participation rate

The decline in the labor force has reduced the participation rate from 62.9 percent to 62.8 percent. The active population with respect to the total population has fallen from 60.4 percent to 60.3 percent.

The number of people who are outside the labor force has increased by 400,000 people to 95.7 million.

With respect to workers compensation, wages have increased by 2.6 percent year over year. For its part, the average wage increased by 4 cents an hour last month.

The dollar continues to rise against the euro, which stands at $1.196 per unit of euro. The US dollar index is up 0.08 percent and remains high since December 2017.

Analysts already expected a weaker data due to the extraordinary data the previous months, when the economy generated more jobs.

It is normal that the figures of the construction sector and the retail sector have been negative, since in previous months they showed a creation of jobs that was not sustainable. Bad weather has also had a negative impact.

 

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