Commentary Magazine

A Strong Jobs Report

Image by © Mike Kemp/Rubberball/Corbis

The November jobs report issued this morning by the Bureau of Labor Statistics was, like the October one, encouraging. Jobs were up by 211,000 while the jobless rate stayed the same at 5 percent, indicating more people coming into the labor market as jobs become more plentiful. The participation rate, as a consequence, rose a tick to 62.5 percent, but that is still down from a year ago when it was 62.9 percent.

Long-term unemployment, those out of a job for more than half a year, dropped from 2.14 million to 2.05 million. But a broader measure of unemployment, including those stuck in part-time jobs when they want full-time work, and those too discouraged to look for a job rose slightly to 9.9 percent.

All in all, the economy, six and half years after the recovery began, continues to improve at a modest rate.

The importance of this report is that it will make it much more likely that the Federal Reserve will this month begin raising interest rates, which have been stuck at near nothing since the financial crisis of 2008. Very low interest rates, while they help stimulate an economy, also distort it. With bonds and CD’s yielding little, for instance, capital tends to move into stocks, pumping up the stock market. The vast increase in the Fed’s balance sheet, as it has acquired federal bonds, threatens long-term inflation because of the consequent increase in the money supply.

Fed chairman Janet Yellen has been hinting strongly that a rate increase is coming soon. In testimony before a congressional joint panel yesterday, she said that the economy “is doing well and that is the reason that it is a live option for us in our December meeting to discuss, as we indicated, whether or not it’s appropriate to raise rates.”  Fed chairmen tend to speak in Delphic phrases — there are three perhapses in that sentence — but that is a pretty good indication that higher interests are coming, and thus a more normal economy.

 

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