Since the financial crisis of 2007-2008, the economy has yet to fully recover. Unemployment rates spiked with around 10 percent being unemployed and have steadily decreased to just under 7 percent in these past 5 years.
While the economy seemed to be on an uphill trend in 2013, these past two months have provided a weak outlook for the job market.
The US economy added 113,000 jobs in January, according to the government. While that is an improvement from December’s 74,000 jobs, the slowest pace in the past three years, 184,00 jobs were expected to be added for January.
While the extreme winter weather has played a role in employers adding new jobs, economists are worried as to whether these two months are simply a fluke or if this is an indication that the economy has hit a plateau. With average hourly earnings and labor participation rate, economists are discouraged.
In November, employers added 241,000 which is why December’s and January’s job additions are concerning. However, even with this dip in jobs, unemployment rates dropped to 6.7 percent from 7 percent. It appears this drop though is not necessarily from people employed but rather from people exiting the work force.
What Does This Mean?
Chief executive at STA Wealth Management, Lance Roberts, according to Fox Business, believes January is the hardest month to predict for job creation because of the seasonal adjustments. Normally, because of holiday shopping, November and December have a higher rate of available positions for seasonal retail employment. In January, those positions are obsolete, thus the unemployment rate and open job market fluctuates.
The jobs that did open in January are mostly in construction, manufacturing, wholesale trade, and mining, according to The Labor Department.
Construction added more than 48,000 jobs among different sects of residential and nonresidential building, nonresidential specialty trade contractors, and heavy and civil engineering construction.
Manufacturing has added an average of 7,000 jobs per month throughout 2013 while wholesale jobs have added a total of 14,000.
Mining has added 7,000 jobs in January, which is a significant increase from its meager 2,000 in 2013.
Although the severe weather is being blamed as the culprit for the weak job report, the lack of positions and growth in the market can still impact the future monetary policy set by the Federal Reserve.
The strengthening job market in early 2013 led the Fed Reserve to ease up on their unprecedented stimulus policies they had initiated in the aftermath of 2008’s financial crisis. With this recent decline, if it continues, there is a possibility these strict policies could be reenacted.
Current economic data has been muddled. Because of January’s unpredictable job market, unemployment decreasing due to those retiring, and inconclusive data on Americans filing for unemployment benefits, the Fed Reserve will most likely continue to scale back its policies until data conclusively reveals the economy has taken a downward spiral once again.
Because headlines for unemployment have been misleading, the future of the economy is still uncertain. Both February and March job rates will provide more evidence as to which direction the economy is heading.
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