Tag Archives: Federal Reserve Bank

Unemployment Numbers at their Lowest in 50 Years

According to the US Labor Department, the unemployment rate for the month of September 2019 fell to only 3.5% from 3.7% the previous month. An additional 136,000 jobs were added to the economy.

Official portrait of Jerome H. Powell. Courtesy Wikipedia.

There was also additional retroactive good news as August’s figures for job growth was updated to 168,000 instead of what had been reported to be 130,000. Some manufacturing jobs last month while wage growth held steady.

The increase in jobs in September was below what has been the monthly average of about 161,000 for the year, but it was still above the number the economy requires every month to stay in line with the growth of the working age population, which is 100,000. The manufacturing sector lost 2,000 jobs in September, after employing an additional 2,000 workers in August.

Manufacturing has been doing poorly across the globe, but it is less a factor in employment than it has been in the past, since modern economies have been transferring away from reliance on this sector.

Despite the positive news on jobs, however, will probably not relieve the pressure on Federal Reserve head Jerome Powell to cut interest rates. The US Federal Reserve Bank cut interest rates for the first time since 2008 in July, and then did it again in September. The bank would like to keep what is so far the longest economic expansion in US history–11 years—moving forward.

Federal Reserve to Refrain from More Bond Buying

Two influential officials from the Federal Reserve announced on Friday that the central bank should wait before buying more bonds. In addition to cutting overnight interest rates down to nothing in December of 2008, the Federal Reserve also purchased $2.3 trillion worth of government and mortgage-related bonds to stimulate growth in response to the worst recession in dozens of years.

Economy Improving, Bond Buying Not Needed

The president of the Federal Reserve Bank in St. Louis, James Bullard told reporters after

James Bullard

a speech he gave in this Midwestern city that as long as the economy seems to be improving, the purchasing of more bonds should be postponed.

“The data has been stronger in recent weeks and months, and so I think there’s probably a good case to stand pat for now,” Bullard said.

“If the economy did deteriorate substantially in 2012, then I think (quantitative easing) would come back on the table, but that’s not where we are right now,” added Bullard, considered a centrist when it comes to policy debated by the Federal Reserve.

Upcoming Policy Meeting

The large variety of positions when it comes to Fed policy was apparent as the officials practiced their differing arguments in preparation for their upcoming policy meeting on January 24-25.

The aftermath of the meeting is expected to result in the announcement of more information about the direction interest rates will take in the near future, as well as an explicit number for an inflation target. It is not expected, however that the Feds will announce any new round of bond purchases.

Bond Buying on Hold, For Now

Some other Federal Reserve officials, including the influential president of the New York Fed, have hinted recently that additional bond buys might need to be considered sometime in the future, but for now Bullard’s position is probably the one which will be followed for now.

Feds Dudley Promoting Tools to Boost US Economy

William Dudley

William Dudley, president of the Federal Reserve Bank of New York, expressed his view that there should be more aid for US homeowners, emphasizing that the central bank has not yet “run out of ammunition.”

“We cannot be satisfied with the current state of the economy or the outlook for the next few years,”

said Dudley, in a speech at the U.S. Military Academy in West Point, N.Y.

Low Interest Rates

The Federal Reserve Bank has been using many of its traditional methods to help boost the sluggish economy, including maintaining record low interest rates since December 2008 so that both businesses and consumers would feel more confident about borrowing money.

Unfortunately the low interest rates have not yet had the desired effect, and the economy is still lagging in a slump. Since the interest rates cannot go below zero, this tool is no longer an option for the Feds.

Operation Twist

This is the reason the Feds began a process called “quantitative easing” in a recently launched program called “Operation Twist.” Quantitative easing is major asset purchasing, whose goal is to bring down long-term interest rates to even lower levels, including mortgages.

Dudley said last Thursday that he believes the economy still has a long journey ahead before it arrives at full recovery, and is convinced that another boost from the Feds may be in order.

Unemployment Too High

Dudley’s forecast was for the US gross domestic product to grow only 2.75% in the coming year, which will not be enough to bring down the unemployment rate and get people back to work.

“I am deeply unhappy with the current forecast of prolonged high unemployment,” he said.