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Jobs, jobs, jobs!

he U.S. economy delivered modest job growth in September, keeping labor markets steady as the presidential campaign enters its final stretch and the Federal Reserve grapples with whether to raise interest rates.

Employment outside of farms grew by 156,000 jobs in September, the Labor Department said Friday. That was the smallest gain since May, though it was a level that, if sustained, would deliver enough jobs to keep up with a growing population.
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The figures suggest that while the labor market has cooled from last year, it has been strong enough to draw in many Americans who previously have been too discouraged to look for work. Meanwhile, wages grew 2.6% over the past year, an acceleration that suggests employers are being forced to compete more vigorously over prospective employees.

The main details of the report fell below Wall Street expectations of a 170,000 gain in payrolls and a 4.9% jobless rate.

The latest figures are also likely to weigh on officials at the Fed, who have suggested they are inclined to raise interest rates once by year end. The central bank has kept rates exceptionally low since the recession to spur economic growth by encouraging households and businesses to spend and invest. But Fed officials worry that keeping rates too low for too long increases the risk of creating asset bubbles.

It’s the same old problem:

One of the key things low interest rates are supposed to do is create an incentive to borrow and spend, by lowering the cost of debt while also reducing returns on savings. In Canada, at least for a while, low rates most certainly did their job in terms of promoting borrowing. Consumer and business debts have risen to record highs. Nationwide household debt is up 47 per cent since the end of 2008; corporate loans (excluding the financial sector) are up 60 per cent.

On the consumer side, the bulk of that increased debt has gone into mortgages, as low rates have sustained a strong housing sector throughout the post-crisis period. The Canadian Real Estate Association forecast that the number of homes sold in Canada will reach a record high this year.

But the economic impact since the latest round of Bank of Canada rate cuts, in 2015, has looked less impressive. Growth in mortgage debt this year has slowed to two-year lows. We’ve seen some of the slowest growth in consumer credit (excluding mortgages) since the early 1990s. Retail sales, which increased more than 4 per cent annually in the years immediately following the financial crisis, grew just 1.7 per cent last year. Growth in business credit has been generally slowing since early 2015 and is below precrisis levels.

Businesses can’t see any opportunity to increase their markets, while individuals, memories of Bre-X, Nortel, the Tech Wreck and the Great Recession still fresh in their minds, are putting their cash into a proven performer – real estate.

This entry was posted on Friday, October 7th, 2016 at 11:08 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.