Showing posts with the label inflation

The Economy Moves from Unemployment to Increasing Wages

As the economy speeds up  Federal Resereve Chair Janet Yellen discusses the growing need to increase interest rates. For now the idea will be reevaluated on a meeting-by-meeting basis to determine when that might happen. Her discussion with the Senate Banking Committee eludes to the idea that her annual target rate will be somewhere around 2% depending on the strength of the economy. For the near future the economy is expected to continue growing.  The market forces related to the speed of the economy will determine these rates. Interest rates are the cost of borrowing money and is primarily based on demand and supply. As money is soaked up in the economy it becomes less liquid and shortages begin to raise the cost of borrowing that money to mitigate risks. For example what you pay for a car today would cost you more tomorrow as the product price rises. You wouldn't get that money for free without paying some type of interest on it as the lender takes risks. Getting money tod

Unemployment Lowers and Opportunity Rises-At least for Some

October was a great month for the unemployment rate. According to government data, 214,000 jobs were added last month and unemployment moved down to 5.8%. This is great news for those who are actively seeking employment and are counted in the rankings. Those in the lowest wage rungs haven’t seen much improvement in wages.  As unemployment numbers decline it naturally soaks up the slack in the labor market. Higher skilled workers usually get the cream puff jobs while lower skilled workers will still be picking up crumbs. Typically higher skilled workers find employment faster because they are needed in penetrating growth sectors of society that rely heavily on education and specialized skills.  Lower wage service jobs and part-timers will be stuck in lower wages until slack in the market is tighten to create demand-not so easy in a global world. Some lower wage workers may find new training opportunities that help them move into higher paying employment but others may simpl

Feds Announce the End to the Era of Quantitative Easing

The Federal Reserve announced a discontinuing of the controversial bond buying program at the end of October this year. They will keep the short-term rates around 0 for the near future.   To this point, the risk to inflation is relatively low and the economy has shown mixed signals of strength in the last year or so. The Federal Reserve seeks to support the   3% projected national growth rate while not undercutting gains in the employment market.  Lower Unemployment and Skepticism :  Unemployment dropped to 5.9% but wages have not risen to provide an income boost. Most Americans are still skeptical of the economy and feel that improvements will occur sometime next year. They are not sure when next year but “sometime” seems to be the target spot. It is skepticism that is a result of not seeing high paying jobs and wage increases. Bond Purchases :  The bond purchases were controversial from the beginning but were seen as one avenue of encouraging development out of t