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Job growth continues in August

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.