New statistics released on Thursday by the U.S. Labor Department show that unemployment throughout the country has fallen to its lowest rate in the last 7 years, dropping to 5.3 percent after the month of June saw employers hiring at a fast rate. However, this drops against the background of less people actively searching for work and wages stagnating.
Over the last month, more than 223,000 new jobs were added to the economy, capping off another solid month when it comes to employment. Unemployment on the other side has reached its lowest levels since during the early stages of the financial crisis, with it being at 5 percent in April 2008. One year and half later that stat doubled under the pressure of the worst phase of recession.
However, this should be taken only in context: it appears the cause of low unemployment is actually a decrease in the number of US citizens actively searching for a job, rather than anything else. The unemployment rate is calculated only by taking into account individuals who actively search for a workplace; those who, for example, lose their job and give up or postpone searching for another are not counted. In this regard, the proportion of Americans active on the labor market (employed or searching for job) has dropped to its lowest since 1978.
And while the active labor force actually decreases, the wages don’t do much in that regard. In the past 12 month average wage has gone up by just 2 percent – quite an insignificant amount, which for all means and purposes equals with stagnation.
These numbers put more scrutiny upon the expected upcoming decision of the US Federal Reserve of raising interest rates above 0 percent for the first time since 2008, when it adopted the measure as a stimulus effort to revive a battered economy. With the situation now stabilizing if not outright improving, many rumors suggest that the Federal Reserve will raise interest rates somewhere in Q3 or Q4; this would mean, among other, higher rates for mortgages, auto loans or any other type of credits or borrowings.
On the bright side, the average 221,000 jobs added monthly over the last three months show that employer confidence in the economy is present and even slightly growing. This comes to complement last month’s Consumer Sentiment Index which reached its highest value since 2005, signaling great consumer trust in the economy overall.
