In a world of Ben & Jerry’s and all sorts of exotic ice cream flavors, the U.S. economy is just plain vanilla.
The U.S. added a solid 156,000 jobs in September and the unemployment rate rose slightly to a still-low 5%, the government said Friday. Decent enough. The economy is also on track to grow 2.1% in the third quarter and match the post-recession average, the Atlanta Federal Reserve’s forecasting model shows. That’s about as well as can be expected.
The plain performance of the U.S. economy is likely to be reflected this week in a light calendar of reports.
Small business owners are more optimistic, but not nearly as much as they were before the Great Recession, a trade group index has shown. Job openings are at a record high, but companies are in no rush to fill them. And while retail sales could show a sizable jump in September, that’s partly because gasoline prices rose and auto makers offered deeper discounts to lure customers.
Goldilocks economy? Hardly. The U.S. is doing better than most of the world, but it’s lagging well behind its historical 3.3% growth rate and there’s no reason to expect that the change. Growth is on track to fall below 2% in 2016 after hitting a nine-year high of 2.6% last year.
The plain-vanilla performance, however, is enough to smooth the way for the Federal Reserve to raise a key interest rate before year end. Some central bankers worry that inflation could rise if an upward trend in wages accelerates, a risk that’s increased as the pool of available workers has shrunk.
The big question among investors is whether the Fed will act in November or December. The odds strongly favor the end of the year after the presidential election. Another reason: the effect of Hurricane Matthew. Thousands of companies closed and millions of Americans fled their homes in the Southeast to escape the storm and that could depress spending.
“A super-cautious Fed won’t know how much of the October weakness stemmed from the hurricane,” argued Sal Guatieri, senior economist at BMO Capital Markets.
As Chairwoman Janet Yellen explained last month, senior Fed officials would also like to see more people find work. Despite a low U.S. unemployment rate, some 15.6 million Americans who want a full-time job still say they can’t find one. That’s about 3 million higher than before the Great Recession started.
Richard Moody, chief economist at Regions Financial, points out that the official unemployment rate fails to capture the slack or underuse of millions of American workers. Not just the jobless but part-timers stuck in part-time jobs. Some 5.9 million Americans fell into that category in September, far above the average of 3 million to 4 million from 2000 to 2006.
“The number of those working part time for economic reasons remains far above historic norms,” he said.
A plain-vanilla economy has frozen them out. In a just-desserts economy, a lot more of those people would find full-time jobs.