Will Supply Chains Feel Impact of Interest Rate Spike?

According to the Institute of Supply Management, July was another solid month of jobs gains

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As noted here recently, the nation's non-manufacturing sectors – which account for about 80 percent of employment – are reporting the fastest jobs increases in a decade.

But many supply chain managers may wonder: With jobless claims at near a four decade low, what are the implications for a spike in interest rates and subsequent impact on supply chains?

According to the Institute of Supply Management, July was another solid month of jobs gains, and is consistent with other strong data on the labor market. Indeed, jobless claims are near a four decade low.

Analysts at IHS Global Insight say these data are consistent with an underlying growth rate in the economy of 2.5 percent to 3.0 percent and suggest that U.S. companies are shrugging off bad news in the rest of the world.

IHS Global Insight's chief economist, Nariman Behravesh, says there are implications for the first Fed rate hike:

“If the Fed was looking for further reasons to begin raising interest rates in September, it found plenty in the July report,” he said.

He pointed to decent payroll gains, an increase (albeit small) in the labor force, a bounce in manufacturing jobs, and growth in wages (albeit still tepid).

“That said, a labor force participation rate that remains at a 38-year low and wage gains that could be signaling more slack in the labor market don't make a September rate hike a slam dunk,” Behravesh concluded.

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About the Author

Patrick Burnson, Executive Editor
Patrick Burnson

Patrick is a widely-published writer and editor specializing in international trade, global logistics, and supply chain management. He is based in San Francisco, where he provides a Pacific Rim perspective on industry trends and forecasts. He may be reached at his downtown office: [email protected].

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