Although the July employment report was strong, it does nothing to fundamentally change the outlook for the Federal Reserve. And employment reports in future months are likely to similarly take a back seat to the most critical trigger factor for monetary policy: inflation — or lack thereof. The July employment report highlighted the growth trend in the U.S. labor market that we have seen since the Great Recession, with the number of jobs created exceeding forecasts while sending the unemployment rate lower. Despite the health of the U.S. job market, a September Fed rate hike is widely considered unlikely, and even a December increase doesn’t appear to be a guarantee. In fact, the CME Fed Funds Futures showed the chance of no rate change in December at less than 50 percent. This is because, against the backdrop of an improving labor market, wage inflation remained tepid at only 2.5 percent. Granted, the level of wage inflation is higher than the core inflation measure — which excludes volatile food and energy prices — of only 1.5 percent in the second quarter, but it is very low for a labor market that looks hot.But the labor market isn’t as hot as it appears, and inflation is being held back by low levels of labor force participation. Annual labor force participation bottomed out in 2015 at 62.7 percent — the lowest annual rate since 1977. In 2016, despite the job gains and a fall in unemployment, the annual average labor participation rate rose to only 62.8 percent, which was only a modest bump — and it was still the lowest level since 1977. In the latest employment report, the participation rate was 62.9 percent. In other words, even with the job growth there’s little sign of a resurgence in labor force participation. It’s not that the labor market isn’t tight; it’s just that there are more people on the sidelines now then there have been in 40 years.
The government is closely monitoring daily price variations in over two dozen essential commodities – from wheat to tea – to check at early stage any abnormal movement in rates post GST rollout, CBEC Chairperson Vanaja Sarna said. Prices have remained by-and-large under check post Goods and Services Tax (GST) implementation on July 1 and there has been no big instance of supply disruption, the chairperson of the indirect tax body told PTI.
The roll out of the biggest tax reform since Independence has been “relatively smooth” with multi-layer monitoring and officers of the tax department have been working overtime to weed out major bottlenecks in the implementation, she said. GST unified 17 different levies including central excise, service tax and VAT and there were apprehensions of initial hiccups. “The Consumer Affairs Ministry is giving us the daily price, the price variations in common commodities. In that there was nothing untoward that has happened. For the past 30 days we get a report every single day,” Sarna said. She said prices of about 25-30 of the most common goods, the food items used in every household – wheat, rice, pulses, sugar, tea – are being monitored by the ministry and it sends the daily reports to the revenue department and Cabinet Secretary office. Post the rollout, the Cabinet Secretary had formed teams of over 200 senior bureaucrats to monitor on a daily basis price and supply situation and ensure there are no disruptions. These officers were given about 3-4 districts to monitor and report to the Cabinet Secretary any issue with regard to either shortage of goods or unusual price rise or something to be concerned about. Asked if there have been reports of supply disruption, Sarna said there have been instances in some odd pockets, may be for a short while.