An October employment report illustrates employers have been actively hiring causing the unemployment rate to decrease, which could mean a December interest rate increase from the Federal Reserve.
There were 161,000 payroll jobs created last month, according to the latest Labor Department report. In addition, in a revised August and December report showed 44,000 more jobs were created than previously reported.
Following the release of the October employment report that highlighted unemployment numbers down to 4.9 percent, Federal Reserve Vice Chair Stanley Fischer said on Friday during an International Monetary Fund economics conference that the U.S. labor market is in a “powerful” recovery. Fischer argues that the economy is still growing, as the U.S. labor market is nearly at full employment.
Despite Fischer’s comments on the U.S. economy, Fischer did not suggest that the Federal Reserve will increase interest rates during their December meeting, which is a year since the first post-housing-crisis rate increase. Fischer explained, “The markets put a probability of above 70 percent on the rate being increased in December.”
Fischer continued, “This recovery has been and continues to be powerful in terms of one of our two main targets — employment — and it is my view that the labor market is close to full employment.”
Created in 1913 with the Federal Reserve Act under President Woodrow Wilson, was a compromise between Republicans and Democrats. It is important to note that the Fed’s main goals are to: maximize employment, stabilize prices, and moderate long term interest rates. With 12 Federal Reserve Banks across the United States each is responsible for member banks in their region.
The main reason the Federal Reserve has not increased rates is partly due low rate of inflation, due to low oil prices. However, as energy prices stabilize and the cost of housing and medical care increases, inflation could hit the Federal Reserve’s 2 percent target threshold soon.
The Federal Reserve’s inflation tool, the PCE index, has increased to 1.2 percent in the last 12 months. In addition, the Dow and S&P 500 are at record highs, the median price for a home is at $231,000 which is at pre-housing crash highs, the price of gas are stabilizing to the record rate of $2.15/gallon. Most importantly, the average income for the bottom 99% grew 3.9% in 2015, which is the best growth in the past 17 years.