Economy Finally Shows Signs of Decent Growth

The recent jobs report certainly made some investors happy as the surprisingly high numbers brightened up the country’s economic outlook. For the second straight month, the U.S. added jobs. Wages also picked up a little steam. Good news came from the trading floor as well since stocks recently posted record highs while volatility is hovering around record lows. China appears to be stabilizing, and for now, the Brexit is in the rearview mirror. ZeroHedge reports that with the U.S. economy finally showing signs of decent growth, the Atlanta Fed issued a stunning prediction of GDP growth increasing at a 3.8 percent annual rate during the next quarter. This means that the Federal Reserve will likely increase interest rates.

Decent Economic Growth Launches its Comeback Tour

After a 292,000-job surge in June, workforces continued to help the economy. They did so by adding 255,000 more jobs in July. Hiring was broadly based across the economy’s sectors. Economists predicted that July’s employment numbers would increase by 180,000, so the country’s employers caught many of them off guard. Along with the higher job numbers, average hourly earnings grew by a solid .08 cents an hour, which brings wages up by 2.6 percent so far this year. Employees are also working more hours. Michelle Meyer, a Bank of America senior economist, said, “The July jobs report was everything you could have asked for and more.”

Once the data report came out, the dollar rallied against other major currencies while yields grew on the country’s government debt when traders started increasing bets to prepare for rising interest rates. Last Friday, U.S. stocks saw their best day in a month with the NASDAQ and the S&P 500 netting record highs. The .SPX and the .IXIC indexes also saw growth.

Will the Economy Become a Factor in the Presidential Race?

Reuters reports that a stronger labor market that includes wage growth could influence the November election. In every presidential race, the state of the economy is a key issue. Generally speaking, people vote based on their pocketbooks. When economic growth is diminished, the incumbent party is usually doomed. Because of this, the new numbers likely have Clinton’s campaign staff feeling more confident. On Monday, presidential nominee Donald Trump shared his economic vision for the country during a speech that he gave in Detroit. He intends to cut taxes and decrease regulations.

A Rate Hike is Looking More Likely

With the country’s recent job growth, the Fed is likely feeling confident that the labor market is at or close to full employment. To stay in line with population growth, the economy must create slightly less than 100,000 jobs a month. Last December, the U.S. central bank increased interest rates, but this was the first time that it did so in almost a decade. Since that time, the Federal Reserve has kept rates steady due to worries about low inflation as well as a global economic slowdown.

Because of persistent global concerns and the country’s nearing presidential election, most economic experts predict that the Fed will wait until December to raise interest rates again. However, the financial markets don’t appear to share this train of thought.

Rising Wages Strengthen the Economy

Last month, average hourly earnings rose by 0.3 percent, which resulted in a 2.6 year-on-year gain. In addition, employers increased the average workweek for employees by 0.1 hour to 34.5. This is the highest hour increase since January. With employees seeing higher hourly wages and more hours on their paychecks, average take-home pay grew by 0.6 percent.

Greg Daco, the head of the United States macroeconomics for Oxford Economics in New York, said, “Businesses are still willing to invest in labor and pay higher wages to retain employees. The combination of strong employment and firming wage growth should remain supportive of income and consumer spending.”

However, the economy’s 2007 through 2009 recession recovery is showing signs that it is aging while payroll gains may list over the next year. Also, the broad measure of the unemployment numbers, which includes those who have a desire to work but have given up searching as well as people who are working part-time hours because they have been unable to find a job that offers full-time employment, increased to 9.7 percent in July. This is a one-tenth of a percentage point increase.

A Note of Caution

With the economy finally showing signs of decent growth, there is a reason to feel carefully optimistic. However, according to predictions, major industries like oil, gas, rail and mining are unlikely to experience an upturn during 2016. Because of this, overall growth may face a challenge for the second half of the year. To read more about the economy’s recent expansion, head over to the PersonalMoneyStore.

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