It seems that right now, the Federal Reserve has been eyeing a December interest rate hike, and not much could stand in the way of that happening at this point. As it stands, there is only one way that a December interest rate hike would not happen, which is if the upcoming jobs report came out and it showed that there was lackluster improvement in the economy, and it seems that a bad jobs report is highly unlikely to happen.
If you were wondering, the new jobs report, which will show the November numbers, is scheduled to be released on Friday, and it should be showing even more job growth in the economy. Hiring seems to be at an 11-month high and there is also almost record numbers of job openings out there right now, and these two positive things about the economy are going to likely mean an interest rate hike is going to happen this coming month.
It is predicted that at least 205,000 new hires coming in for November, which is down but only slightly from the 271,000 new hires back in October. October was actually the biggest jobs increase of the year, and that is up from the summertime when hiring sort of slowed down, although it still was up from previous years.
It is expected that the rate of unemployment will stay at 5 percent, but it could dip to 4.9 percent, although not much should be made of that if it happened. Whether unemployment is at 4.9 percent or 5 percent, the thought is that it will not affect the Federal Reserve when it comes to signaling for an interest rate hike at next month’s policy meeting.
There is not much evidence that the economy is going downhill at all, even though energy producers and manufacturers are still having issues because of a strong dollar and cheap oil prices. The service sector, such as banks, hospitals, retailers, and restaurants are doing very well, and a ton of new jobs are coming out of the service sector at this point in time. Even the often times slow construction industry is expanding at a pretty good rate, and governments are also spending a little more than previous years where the budgets were a lot tighter.
In October, earnings rose through the past 12-months to a new six-year high of 2.5 percent, which means that more people are earning more money on the hour than before. Incomes also went up .4 percent last month, which might not seem like a lot but in reality that is pretty significant. There has been a lot of pressure on companies to increase the pay for jobs, such as in the service sector, which is partially why the incomes rose in October.
While wage growth should be at 3 percent to 3.5 percent, as that is a recovery peak, this is still progress given the situation America has been in for the last several years. Companies are often times now only adding on staff when needed, which is how the companies are now managing a lot of labor costs, and even open jobs have become slower in the hiring process than before.
If you think interest rates are not going up this coming month, think again, because there is even more good news that will be weighing on this decision. There will be a report coming out by the Institute for Supply Management on the service sector, and this non-manufacturing index has been around the 10-year high since the summertime. In November, it is expected that this number will remain constant with around the same 10-year high numbers, and this really shows strength in the service sector.
A report will also be coming out from the Institute for Supply Management, which is a service-sector report that comes out monthly. The non-manufacturing index for this report has been steady near a 10-year high since July and November should also stay around the same numbers. The biggest positive is that the service-oriented companies are growing stronger, and it is offsetting the manufacturers weaknesses, and it also shows America is not relying on manufacturing anymore as the main economic indicator of growth.
Add in all of this good news that is going to drop this week and you have every sign imaginable pointing to the Federal Reserve raising the interest rates for the first time in several years, since 2006 specifically. While historically the growth and recovery is slower than times before, things are not the same as they were before, so you have to adjust the numbers and expectations to the ever-changing economic standards of our time.