The fact that the Federal Reserve Board did not raise interest rates at their last meeting made this week’s release of the job numbers for September very interesting. A weak, or even moderate report would have affirmed the Fed’s position. A very strong report makes the markets think that the Fed should have acted. One must remember that it is not the Fed that causes long-term interest rates to rise, but the market’s reaction to what the Fed is doing. If the markets feel the Fed is not reacting strongly enough regarding inflationary risks, then rates could rise even before the Fed acts.
When the numbers were released showing that 156,000 jobs were created in September, roughly in line with expectations, one might have surmised that this was the best case scenario. The report showed that there is still a
significant number of jobs being created, but it was not strong enough to require the Fed to act, especially right before the election. Even the uptick in the unemployment rate from 4.9% to 5.0% was seen as moderate news,
because the increase was caused by a rise in labor force participation. This means that more Americans are re-entering the job market.
Now that this report has been released, expect that the markets will be focusing more and more upon the coming Presidential election. Thus far the campaign certainly has provided much entertainment, but with the home
stretch upon us, the markets’ focus will be on assessing each candidate with regard to their positions on a wide range of issues that might affect the economy. For example, the consensus from the industry is that neither candidate has made housing issues a focus, despite calls from the housing industry leaders to address several pressing problems within the sector. Eight years ago, housing was front-and-center during the campaign. Another sign of the changing times.
Source: Origination Pro