The Industry Insider

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The Ugly Truth Behind Positive Unemployment Numbers

On Friday, American economists collectively cheered at the news that the nation’s economy added 271,000 jobs in October.  That number was large enough to bring the national unemployment rate down from 5.1% to 5%, the lowest since April 2008.  Leading into Friday’s announcement, most experts expected a much smaller jobs number more in line with the last two months of relatively slow growth.  The report was highlighted by the best results for the construction sector since February, adding 31,000 new jobs in October.  It is certainly welcome news for the economy as a whole and for the construction industry.  But the better-than-expected report is also opening the door for potential decisions and trends that could create yet more economic uncertainty for job creators.

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For many months, the Federal Reserve has toyed with the idea of raising interest rates but has thus far refrained due to sluggish economic growth.  The October jobs report is generating conversation among economic experts that change is on the horizon, and that the Fed may now have the ammunition they need to finally raise interest rates when they meet again in December.  If true, then job creators, especially those in the home construction industry, will be faced with the prospect of conducting business in a slow-growing economy under higher interest rates for the first time in years.

Such an interest rate hike could have damaging effects on the economy and on job creators nationwide, and the Federal Reserve should be cautious when considering this decision.  While the overall unemployment rate has dropped to 5%, the U-6 alternative measure of unemployment – what some call the true unemployment rate – is only just now falling below 10%.  That’s an indication that while the economy is improving, it isn’t where it needs to be to sustain the kind of shock that a premature interest rate hike could present to consumers.

Specifically related to the construction industry, this kind of decision from the Fed could significantly alter the business operating environment for organizations throughout our sector.  Accordingly, companies should work now to ready themselves for such a possibility.  That means working with professionals like Schaffer Associates to ensure that your senior team includes the most talented individuals who know how to adapt and adjust to major changes like an interest rate hike.  Otherwise, organizations could close out the year by looking hesitantly toward 2016 and a much different economic picture than we see right now.  Call us today.

Schaffer Associates

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