Sunday, August 9, 2015

The Fed Ready To Act Regards of Pundits' Opinions

Friday's labor report featured 215,00 jobs created in July. Although pundits were quick to call this report solid, it's probably best characterized as mediocre job creation for a civilian labor force of 157,106 million.

The Fed, nonetheless, will likely raise this fall because of the growing recognition that ultra-low interest rates carries consequences. Bill Gross of Janus Funds highlights the following BIS observation, "persistent ultra-low interest rates sap banks' interest margins...cause pervasive mispricing in financial markets...threaten the solvency of insurance companies and pension funds...and as a result test technical, economic, legal and even political boundaries." In other words, the Fed realizes that its zero interest rate policy is threatening the solvency of banks, insurance companies, and pension funds.

The invisible hand (Review of US Treasury Bonds) is already discounting (anticipating) the economic consequences of a higher dollar and rate hikes beyond September and December 2015.

Headline: US adds 215,000 jobs in July, unemployment rate unchanged at 5.3%

The July jobs report came in right in line with expectations.

The US economy added 215,000 jobs in July, and the unemployment rate was unchanged at 5.3%.

Wages also grew modestly in July, rising 0.2% over the prior month and 2.1% over the prior year.



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