AMERIPRISE FINANCIAL, INC.
November Proves to Be Another Month of Strong Jobs Growth
12/05/2014 | Russell Price
The job market is still not back to where we would all like to see it, but we're making very good progress in getting there.
November was yet another month of strong jobs growth as companies previously operating with very tight labor force levels have been compelled to hire at a more rapid pace amid improving demand.
It's nearly impossible to find fault with the November jobs report. Job growth was very strong, the gains were well distributed, and wage growth is finally gaining traction. These are all very good signs, not just for the near-term shopping season, but also for American economic growth prospects for the next few quarters at least.
As demand further improves, businesses are being compelled to hire at a faster pace. Previously, most businesses had excess capacity available to satisfy new order growth, but with hours worked very high and layoff activity very low, businesses have been getting just about all they can out of their current labor force levels. Simply put, businesses are at the stage where they have to hire or risk losing out on new sales. Improving consumer and business confidence levels also clearly help.
The breadth of industries adding headcount over recent months is encouraging as it shows that the recovery is not reliant on just a few sectors benefiting from what could be temporary factors. The best recoveries are those that adhere to the "rising tide lifts all boats" adage.
No other singular economic metric is more important to, or reflective of, improving economic health than employment. Job growth leads to higher consumer income, which of course, boosts people's ability to spend, and typically, their willingness to spend soon follows. And in an economy as reliant on the consumer as we are, that's important.
Fed Policy: Improving labor market dynamics will place considerable pressure on Fed officials to begin their tightening cycle sooner rather than later. But we believe officials have been very appropriate in highlighting the pockets of slack that still remain in the labor market that are not necessarily being picked up by traditional measures. With recent signs of economic moderation in such key regions as Europe, China and Japan, combined with the recent drop in energy prices, low inflation metrics are likely to give Fed officials added room to maneuver and focus on getting labor markets back up to full health.
Overall, today's employment report shouldn't materially change the market's expectations regarding Fed policy and we still see the most likely first rate hike as emerging from the June or August 2015 meetings.
For investors, the message of strengthening economic activity, and thus the likelihood of stronger corporate profit growth, should trump concerns over potentially sooner than expected Federal Reserve interest rate hikes. The inter-play between economic growth and interest rates will remain a give-and-take, with interest rates unlikely to rise faster than economic fundamentals support. Overall, we believe interest rates are likely to rise at a very modest pace over the next few years and it is likely to be a fairly manageable process - economically speaking.
Important Disclosures:
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.
Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution and involve investment risks including possible loss of principal and fluctuation in value.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
© 2014 Ameriprise Financial, Inc. All rights reserved.
12/05/2014 | Russell Price
The job market is still not back to where we would all like to see it, but we're making very good progress in getting there.
November was yet another month of strong jobs growth as companies previously operating with very tight labor force levels have been compelled to hire at a more rapid pace amid improving demand.
It's nearly impossible to find fault with the November jobs report. Job growth was very strong, the gains were well distributed, and wage growth is finally gaining traction. These are all very good signs, not just for the near-term shopping season, but also for American economic growth prospects for the next few quarters at least.
As demand further improves, businesses are being compelled to hire at a faster pace. Previously, most businesses had excess capacity available to satisfy new order growth, but with hours worked very high and layoff activity very low, businesses have been getting just about all they can out of their current labor force levels. Simply put, businesses are at the stage where they have to hire or risk losing out on new sales. Improving consumer and business confidence levels also clearly help.
The breadth of industries adding headcount over recent months is encouraging as it shows that the recovery is not reliant on just a few sectors benefiting from what could be temporary factors. The best recoveries are those that adhere to the "rising tide lifts all boats" adage.
No other singular economic metric is more important to, or reflective of, improving economic health than employment. Job growth leads to higher consumer income, which of course, boosts people's ability to spend, and typically, their willingness to spend soon follows. And in an economy as reliant on the consumer as we are, that's important.
Fed Policy: Improving labor market dynamics will place considerable pressure on Fed officials to begin their tightening cycle sooner rather than later. But we believe officials have been very appropriate in highlighting the pockets of slack that still remain in the labor market that are not necessarily being picked up by traditional measures. With recent signs of economic moderation in such key regions as Europe, China and Japan, combined with the recent drop in energy prices, low inflation metrics are likely to give Fed officials added room to maneuver and focus on getting labor markets back up to full health.
Overall, today's employment report shouldn't materially change the market's expectations regarding Fed policy and we still see the most likely first rate hike as emerging from the June or August 2015 meetings.
For investors, the message of strengthening economic activity, and thus the likelihood of stronger corporate profit growth, should trump concerns over potentially sooner than expected Federal Reserve interest rate hikes. The inter-play between economic growth and interest rates will remain a give-and-take, with interest rates unlikely to rise faster than economic fundamentals support. Overall, we believe interest rates are likely to rise at a very modest pace over the next few years and it is likely to be a fairly manageable process - economically speaking.
Important Disclosures:
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.
Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution and involve investment risks including possible loss of principal and fluctuation in value.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
© 2014 Ameriprise Financial, Inc. All rights reserved.
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