Unemployment in the U.S. at 49-Year Low

October 9, 2018
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Late Friday came with the news that unemployment in the United States has fallen to a 49-year low. With the rate now at 3.7%, it is the best it has been since 1969.

The latest figures were calculated throughout September and are an indicator that the job market is still strong, representing opportunity for both job seekers and employers.

Growth Despite Below-Expectation Job Creation

The unemployment rate is decreasing despite underperformance of job growth in September. According to CNN Business, 134,000 jobs were created during the previous month. This was slightly below initial expectations and below the monthly average for the year. Job creation in the hospitality industry fell, which some analysts associate with the impact of Hurricane Florence. The leisure industry also suffered, which adds credibility to this theory.

Job growth in September was almost half that of August. It was the only month of the year so far where job growth fell under 140,000.

Why the Huge Drop?

Aside from Hurricane Florence, there are other factors influencing the job market. A low unemployment rate means that some businesses are having a hard time creating new positions. Qualified job-seekers are now vying for highly competitive roles.

For companies, the low unemployment rate means that they will not be lacking in terms of resources. This could allow them to focus on operational issues and productivity, rather than expending resources on filling positions.

For job-seekers, it means that the market is now much harder to break through, however, there has been an increase in hiring of persons with disabilities, which indicates that employers are more willing to hire people that they might not have otherwise considered.

The incredible employment rate creates challenges for both job-seekers and employers, but overall it is a good sign for the economy. For publicly traded companies it could mean better operational performance and productivity. This could have a knock-on effect for investors, although it may not be until 2019 when the benefits are fully measurable.

The low unemployment rate has also led to an increase in average disposable income, which will benefit the economy at large. Consumer spending is the single largest influencer of Gross Domestic Product, a key measure of economic performance.

Stocks May Take Hit in the Short Term

A low unemployment rate and growing economy could lead the Federal Reserve to continue its aggressive rate increases, to keep inflation in check as the economy expands. While this may influence the stock market in the short term, the long-term economic results will offset losses, and, as of today, the bull market prevails.

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