New Job Creation Slows—Will the Economy Follow?

Chart of the Week for September 1-7, 2000

The stock and bond markets reacted positively to the August employment report released on Friday, September 1. This report showed that the economy shed 105,000 positions during the month, and that the unemployment rate edged up to 4.1% from 4% in July.

Two factors contributed significantly to the decline: the end of Census-related jobs and the Verizon strike. Even adjusting for these events, the longer-term picture portrays a slow-down in new job creation. The six-month rolling average of new job creation, which smooths the volatile monthly data, is lower than it has been in nearly five years.

Should this trend persist, it will reduce the risk of an outbreak of inflation. That’s good news for the financial markets, because restrained inflation keeps corporate borrowing costs and bond yields in check.

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