On Friday, it was announced that unemployment rates fell 2 percent to a 50 year low (since December 1969) of 3.5 percent. A distinct drop in unemployment is commonly correlated to a drop in the labor force participation rate, however, the labor force increased by a solid 117,000 while participation rate remained unchanged at 63.2 percent. This new data exhibits a continually increasing labor force, a frequently looked for statistic used when measuring national economic growth. The main market that drove job creation was healthcare, which saw an immense bump of 39,000 new jobs that managed to mitigate a decreasing retail labor force.
As fears of an upcoming recession has grown, investors have begun to trade more timidly and that fear has been reflected by fluctuating drops in the stock market. However, once this labor data was revealed on Friday, the stock market witnessed a major rebound as Dow rallied over 350 points. As described by traders, this rebound was mostly caused by recession fears dampening behind a growing labor force, leading investors to regain confidence in the economy and therefore the market.
Despite the obvious benefits an increase in the labor force has on our economy, not all of the data is good news. We have only experienced a wage increase of a mere 2.8 percent this year, the lowest since July 2018. Furthermore, experts are concerned about the labor force maintaining its strength amongst a slowing global economy. Until the United States and China take their next step in trade talks to reduce tariffs, a weakening global economy will continue to penetrate the heart of the United States economy and could prove detrimental to the success of the United States labor force and economic prosperity as a whole.
Keith Knutsson of Integrale Advisors commented that, “We should be optimistic about the impact of a strong labor force on the United States economy, however, we need to remain cautious as a weakening global economy will likely continue to impact the US.”