Reuters reported that “Fed’s Williams sees strong case for December interest-rate hike.”
There is a “strong case” for raising interest rates when Federal Reserve policymakers meet next month, as long as U.S. economic data does not disappoint, a top Fed official said on Saturday.
“The data I think have been overall encouraging, especially on the labor market,” San Francisco Fed President John Williams told reporters after a conference at University of California Berkeley’s Clausen Center.
Let’s see if The Fed’s Williams is correct.
If we look at the U3 unemployment rate and jobless claims, both have returned to levels prior to The Great Recession (although it took a hell of a long time since The Great Recession ended in June 2009).
On the other hand, the U6 underemployment rate still remains above the highest levels from 2000-2008.
In terms of NATURAL rates of unemployment, the U3 unemployment index resides BELOW the natural rate of unemployment.
And with so many jobs being created (non-farm payrolls) and U3 unemployment rate lower than the natural rate of unemployment, why is wage growth so low?
Here is one reason why wage growth is slow. This chart reflects the number of unemployed in the US combined with the number of people not in the labor force. This is the number of NON-WORKING Americans. This number has been fairly level since 2009.
The good news is that YoY growth in non farm payroll jobs have mostly been higher than the YoY growth in NOT in labor force in 2015. Except for the last report.
So what will be released in the next jobs report that will be so stunning? I sincerely doubt if there will be any significant movement upwards in wage growth, particularly if the jobs added are in the low realms of wages. Sorry, john, I just don’t see the recovery, at least in terms of wage growth when there are over 94 million NOT in labor force.