Investors and entrepreneurs are two groups that benefit from a lousy jobs market. Before Friday’s open, the government said, U.S. employers added 151,000 new jobs in August, missing estimates for 175-188k. Meanwhile, the headline unemployment rate (a.k.a U-3 rate) came in at 4.9%, slightly higher than the Street’s 4.8% estimate. That doesn’t tell the whole story. The broader unemployment rate (a.k.a U-6 rate), stands at 9.7% which leaves a lot of people looking for work. As a quick refresher, the U3 is the official unemployment rate. U5 includes discouraged workers and all other marginally attached workers. U6 adds workers who are part-time purely for economic reasons. (Here’s another Forbes article which discusses last month’s jobs report in more detail- Read Here)
Here’s a Closer Look At The Jobs Data:
So the logical question remains: Who benefits when so many people can’t find work? The short answer: investors and entrepreneurs. Investors win because the stock market is addicted to easy money from the Fed and other central banks. So a weak jobs report implies, the Fed will not raise rates in September. All things being equal, that should help stocks rally. Entrepreneurs also win because some people who can’t find work decide to take the leap and start their own business.
Franchise attorney Harold Kestenbaum sees the report as an opportunity for those seeking work, as the push needed to finally start their own business. Harold said, “The reality is, slow job growth will probably benefit franchising and entrepreneurship to some degree. If people cannot find a job, they may very well choose to own a business and not bother to work for anyone other than for themselves,” says Kestenbaum. But owning a business isn’t always the easiest option. The Long Island based lawyer said while being an entrepreneurial is rewarding, it’s no simple task. “This alternative only helps franchising since becoming a franchisee is the easiest way to own your own business. Not all can, of course, but if the Fed elects not to raise interest rates now, it will certainly help these people obtain the financing they need to buy a franchise.”
Cynthia Sommers, head of marketing at BCBConcepts.com, an independent agency that helps businesses grow, told me, “A lot of people are coming to us and asking for help building a brand and developing a new marketing strategy for their business. The economy is not growing at a fast rate but it is still growing. Medium and Large businesses are also coming to us for help, because they are able to start a new division (a.ka. business) and hire new people (that are looking for work).
The Fed’s Problem:
The overall economy remains anemic at best and that remains a big problem for the Fed and other Central Banks. If the economy is barely growing with rates near zero, what will happen if rates go up? Maybe if more businesses are created- that will help the economy grow?