US Macro: Unemployment rate & NFP February 2017
- Unemployment rate:
In the long term in has very well defined the structure. It keeps going down like in any other expansion phase of the business cycle. It’s true that current levels are quite low, which can signal the end of the cycle. But remember 3 things:
-Not that low: There is still margin to get closer to a 4% unemployment rate.
-Labor rate participation: That’s quite low, which might mean that there are still people that would actually like to work but aren’t counted as unemployed.
-Cycles are not periodic: Cycles have always been there and will probably always been there. Low unemployment might mean peak of the cycle, but we can be “peaking” for years.
In the short-term unemployment has started to go down again, remember it’s not just about the number but about the rate of change. If unemployment keeps going down that’s good news.
- Non-Farm Payrolls
Just looking at NFP is not very useful. Obviously, as the population grows the NFP grows just because there are more people to work. So what we are going to look at is the CHANGE in NFP month after month. This way we can see if the economy is creating new jobs a good rate, low rate or if it’s even destroying rates.
What we want to see its an economy creating jobs at a good rate. And then we want to make sure we stay vigilant just in case the rate of creation slows down or it even goes negative.
As we can see in the graph the beginning of 2016 didn’t look very good. But since then Change in NFP has again stabilized and the US economy seems to be creating jobs at a very healthy rate.
Concluding, the job market looks healthy as of February 2017. What this suggests is a CONFIRMATION of the bullish view suggested by out leading indicators.
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