Will Disappointing Job Creation Lead to Lower Rates?

Will Disappointing Job Creation Lead to Lower Rates?

January 8, 2018

Michelle HolmesMichelle Holmes
Trust Investment Officer

Friday’s jobs announcement disappointed. Jobs increased 148,000 in December when analysts expected the creation of 190,000 nonfarm payrolls in the month. One reason for the disappointing number in December is the trend in online retail. Brick and mortar stores saw a decline in employment during the month. Another reason is the shrinking labor pool. The number of retirees is increasing while the number of prime age workers is flat over the last decade as shown in the chart below.

Chart: Retirees and Prime Age Workers

Source: The Daily Shot retrieved from http://www.wsj.com

The slowdown in employment growth coupled with the low unemployment rate (4.1%) shows signs the country is nearing full employment. This has not translated into higher wage growth yet as theory and past recoveries suggest. Year-Over-Year wage growth was 2.5% in December 2017.

Despite the slowdown in employment, will the Federal Reserve continue to raise short-term interest rates? The short answer, yes. The futures markets place a 75% chance of the Fed raising rates at the March meeting. The Federal Reserve’s committee members predict three interest rate hikes in 2018 while the market is not far off in expecting two rate hikes this year.

If you want to know how this or other news items may affect your portfolio, contact the Security National Bank Wealth Management team today. 


About the Author

Michelle Holmes, CFA

Michelle Holmes is an Assistant Vice President in Investments with Security National Bank's Wealth Management Division. A Chartered Financial Analyst® charterholder, Michelle has two decades of investment experience. She graduated from Morningside College with a Bachelor of Science in accounting, business administration and economics.