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U.S. Economy faces Hurdles Despite 5.5% unemployed

US Job Market still faces challenges ahead despite 6 year low fall in U.S. unemployment rate 5.5 percent. Recent jobs report showed U.S. economy had added about 295,000 jobs in the month of February is pleasing and is indicative of the strong labour market conditions in the economy. The unemployment rate too slid from the 5.7 percent level to 5.5 percent. But if one were to look at the numbers very closely, it would be made apparent that the fall in unemployment rate has been on the back of many people falling out of the job market altogether which is raising concerns not just for the economists on the street but also for the Federal Reserve. Another huge cause for concern was the fact that wage growth remained sluggish.

This complicates the task for the Federal Reserve which many believe would be forced to raise interest rates for the first time in 6 years at their June policy meeting.  The Federal Reserve isn’t very sure if the economy has strengthened enough to withstand a rate hike at the current moment. The jobs report yesterday is a clear indication about the robust growth in the labour market. It is estimated that it is for the first time since the 1990’s that employers have added close to 200,000 jobs for 12 straight months. Also, compared to other parts of the world, the US economy seems to be doing pretty well. For example, the unemployment rate in the Eurozone is 11.2 percent which is almost double of that in the US.

Economists believe that the unemployment rate which only considers people who are actively seeking employment might be not painting the whole picture. Also, the lack of growth in hourly wages should be a huge concern for the Federal Reserve as it would mean that the consumption pattern might remain depressed going forward.

About Terry R. Nixon

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