SPRINGFIELD, Mass. (WWLP) – There are less than two weeks to go until the next Federal Reserve meeting, when interest rates could be increased for the first time in nine years. The decision is typically determined by two factors: steady inflation and a good job market.
If the jobs report released Friday morning had come in above 200,000 or so, it would’ve given a clearer indication that the U.S. Economy continues to grow and is strong enough to support higher interest rates. But it fell below economists’ predictions; just over 170,000 jobs were added in August.
Following the credit crisis in 2008 and 2009, the Fed lowered rates to zero to make borrowing easier — for businesses looking to expand, and for American consumers to buy homes or finance cars. Back then the unemployment rate was 10% – that’s now cut in half. But interest rates never changed.
“We made it through the credit crisis and the stock market has recovered. The overall economy has recovered. Consumption has recovered. The Fed just needs to do it to get it over with,” said Tim Suffish of St. Germain Investments.
But other analysts argue it’s not the right time. China’s is slowing down and the U.S. stock market is jittery. This recent jobs report doesn’t help. But Suffish said when interest rates inevitably go back up, it’s going to happen slowly.
“What we’re all talking about and worrying about is the Fed going from zero to .25% – a fraction of one percent. In the real world that’s not really going to change any business decisions,” he added.
Another thing to consider: these jobs numbers can be inaccurate. Especially in August as many people are on vacation when the government conducts its monthly survey.