Economics Update

By Sam Bondy

This past Friday October 3rd, the Labor Department reported September nonfarm payrolls grew by 248,000. This was compared with median projections of 215,000 (Bloomberg). Thus, the United States unemployment rate ticked down .2% to 5.9% for September (it was around 10% at the height of the most recent recession).

Despite this report, economists remain vigilant of other indicators of employment market health. This includes statistics such as the labor force participation rate, average hourly earnings and U6. All of these metrics are on Janet Yellen’s, the current Chair of the Federal Reserve, radar.  According to one half of the Fed’s “dual mandate”: fostering maximum employment, Yellen remains wary of these figures and believes there may still be some “slack” in the labor market. In fact, according to the Bureau of Labor Statistics, right now the number of workers who are “Part-Time for Economic Reasons” (involuntarily part time) is over 7.1 million. On top of which, private-sector average hourly earnings actually fell by one penny to $24.53.

The graph below shows both the “Civilian Unemployment Rate” as well as the “10-Year Treasury Constant Maturity Rate” year to date. The Fed has been pushing down interest rates, which has resulted in both lines sloping downward. Theoretically, as the economy improves and the unemployment rate decreases past a certain threshold, the Fed will start to raise interest rates. When this happens, the red line will start to slope upward while the blue line will continue downward (and then probably flatten out). The 10-Year Treasury Note, a common benchmark security is currently yielding 2.45% (it rose by one basis point on Friday). They are expected to yield roughly 3.5% one year from now.

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