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An report issued by ADP indicated that 177,000 jobs were created in August 2016. The payroll report is issued by Automatic Data Processing, the payroll firm with assistance from Moody’s. The reports are often subsequently revised with the July figures being adjusted upwards by about 24,000 positions. The payroll report uses private company data for the month as well as lagging data from governmental job sources.
While the job report for August shows an increase in positions it does show that job growth ha slowed in recent months. However, in a time with much economic disruption in many different industry, the report has showed that the labor market remains relatively strong, given the circumstances.
There are many who believe that the positive job figures will push Janet Yellen and the Federal Reserve Central Bank to raise interest rates later in the year, likely in November or December. While there is a risk that the increase in central bank interest rates will lead to a financial recession and exodus from the stock market, not raising rates also remains a risk for both inflation and for a growing governmental burden.
Low interest rates also harm savers and remove a bullet from the proverbial gun of the Federal Reserve if economic sanctions were to hit. Further, raising rates will also impact foreign exchange currencies and possibly further strengthen the U.S. dollar which is already at relative highs when compared to other currencies around the world. Another nations; in particular Japan, China, and the European Union, have all take steps to weaken their currencies to promote exports. Some of the nations are currently offering negative rates to lenders on their bond issuance.
Continued job growth is a positive sign that the economy will be able to absorb an interest rate increase. The ADP report does not track wage increases and only raw statistics on job and there have been many criticisms that the lack of wage increases is hiding weakness in the labor market and that the Fed should tread slowly in raising rates. Having said that, the United States labor market and economy remains the envy of most of the developed world despite a slow growth atmosphere.
One of the most significant indicators of the overall strength of the economy in the United States is the level of unemployment and job growth. According to a recent news article (http://www.usatoday.com/story/money/2016/08/31/adp-businesses-added-solid-177000-jobs-august/89606368/), the economy and unemployment rate continue to see positive results.
During the last week of August, payroll processor and service provider ADP said that the United States added about 177,000 jobs in August. This was a positive report compared to predictions that the economy would add around 175,000 jobs. The official Labor Department’s results are still forthcoming, but are expected to report something in a similar manner. The amount of jobs added came from all different sources. Small businesses reportedly added about 63,000 jobs, mid-size companies added about 44,000 jobs, and large organizations and corporations added about 70,000 jobs.
The addition of jobs also came in a variety of industries. The professional business services division ended up adding around 53,000 jobs. The trade, utilities, and transportation industries ended up adding around 26,000 different jobs. While most industries saw an improvement in job addition, the construction industry was the one industry that saw a decline. Construction jobs were reduced by about 2,000, which could be somewhat attributable to seasonality as jobs slow down leading up to the winter months.
While the jobs report has been very positive, it could have a variety of of impacts on the economy. The most direct way that it could impact the economy is when it comes to key interest rates. Key interest rates in the United States have been very low for more than five years. The government has kept rates low to encourage spending to end the recession that started in 2008. Now that the economy has improved and the unemployment rate has been reduced, many people are now concerned that key interest rates could start to increase dramatically over the next few years. The federal reserve and other organizations will continue to discuss jobs reports and other economic data before making a decision on interest rates in the next few months.