It is true that most economists and market analysts believe the US economy has stabilized enough in the face of lower jobless rates and inflation figures for the Feds to raise interest rates, recent job reports show the Federal Reserve is justified in waiting for so long before raising rates.
The US rates has been near zero for nearly seven years, and just last month the Federal Open Market Committee which makes policy for the Fed decided again not to raise the much expected rates.
The US market added 142,000 jobs for September – a number that is below expectation, and the figure for August was revised from 173,000 to 136,000 – the second worst month so far in this year. But then the rate of joblessness as held out at 5.1% – a seven-year low, while the wage growth for September remained very discouraging for many watchers.
“The Fed has been vindicated for waiting. They wanted to see what the impact of the tightening in financial conditions and weakness abroad would be on the US,” said Priya Misra, head of global rates strategy at TD Securities. “Today’s report was unequivocally weak. It’s only one data point, so it’s not clear that it is the start of something more ominous, but the Fed should wait for more data.”
And then, as much as the Fed continues to analyze incoming data for the economy, it is also watching how market trends that have long-term effects might impact on these data. Meanwhile, the Fed seems to base their monetary setting policy and rates-raising decisions on full employment creations and stable inflation figures.
Despite the recently released report, the Fed remains positive that inflation would inch toward the 2% benchmark target set for it.
Just last week, Fed chair Janet Yellen disclosed that several other indicators suggest that joblessness rate at the moment underscores how much slack remains to be seen in the labor market, but on balance the economy is no longer far away from full employment.
Yellen went ahead to reveal structural problems still remain for the economy to overcome. According to her, the labor-force-participation rate remains low on a cyclically adjusted basis relative to its underlying trend, and an unusually large number of people are working part-time but would prefer full-time employment.