Is The Economy Adding Jobs At A Steady Clip? Report Will Offer A Clue

Jun 3, 2016
Originally published on June 3, 2016 11:30 am
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DAVID GREENE, HOST:

Let's turn of the U.S. economy. In less than two weeks, the Federal Reserve will decide whether to boost interest rates for only the second time since the Great Recession. One big factor will be whether the economy is continuing to add jobs at a steady clip. And we'll get a big clue about that later this morning in a new monthly jobs report, as NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: Just last week, Fed chair Janet Yellen was asked whether it's time for a second rate hike. And she said this.

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JANET YELLEN: Probably in the coming months such a move would be appropriate.

YDSTIE: That suggests the Fed could raise rates at its meeting in the middle of this month or in late July. John Silvia, chief economist at Wells Fargo, thinks today's jobs report will show the unemployment rate has dropped to just 4.9 percent, giving the Fed a reason to move.

JOHN SILVIA: That is consistent with what some Fed officials have indicated is their estimate of full employment.

YDSTIE: Yellen acknowledges the Fed is getting close to its full employment goal.

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YELLEN: But the number of individuals working part-time who would like to have full-time jobs is unusually high.

YDSTIE: That number is coming down, but Yellen worries it's still much higher than normal. And she remains concerned that wage growth remains too slow. But if both the part-time and wage numbers improve significantly in today's report, they'll provide more support for a rate hike.

John Silvia says job growth for May could look a bit weaker than it really is because of a strike at Verizon. Thirty-five-thousand workers there weren't counted as working last month, even though their strike was settled last week. According to a number of surveys, economists think job growth in May totaled around 160,000, about the same pace as April. Silvia thinks it will be a bit weaker than that but still at a pace reflecting steady economic growth.

SILVIA: Except for maybe one or two minor sectors, everybody's adding jobs, including the federal government, state governments and certainly in the broad service sectors.

YDSTIE: Silvia believes the job market is strong enough to meet the Fed's test for a rate hike. But he thinks it's more likely to come in July than in June. That's because the British vote on whether to stay in the European Union comes just after the Fed's June meeting, and policymakers may worry that a rate hike plus a vote to leave could destabilize global financial markets. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.