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Unemployment jumps to 5% -- the Fed's next move?

Posted Jan 4th 2008 10:17AM by Joseph Lazzaro (RSS feed)
Filed under: Bad News, Employees, Economic Data, Federal Reserve

The nation's economy created just 18,000 jobs in December 2007, substantially below the 70,000 estimate, the U.S. Labor Department announced Friday, sparking fears that the sluggish U.S. economy is now sapping the market of even modest job growth.

Further, the unemployment rate also jumped three-tenths of one percent to 5%. The jobless rate had been below 5% for more than two years.

Pressure builds on Fed

"We've gone from tepid job growth to anemic job growth," economist Steve Affinito told BloggingStocks Friday. "There's no question this puts more pressure on the Federal Reserve to cut interest rates. At least one more rate cut is a done deal, and they'll probably have to cut two more times, or more. The Fed will also want to see data on job creation in January and February, but we can't have an economy creating 20,000 jobs a month. That's nowhere near enough." Affinito added that he expects the Fed to cut key short-term interest by an additional 50-75 basis points.

Continue reading Unemployment jumps to 5% -- the Fed's next move?

Payroll boost supports Fed position

Posted Dec 8th 2006 9:02AM by Douglas S. Roberts (RSS feed)
Filed under: Before the Bell, Market Matters

Payroll data was released at 8:30 AM with employers boosting payrolls by 132,000 in November. Unemployment rate edged up slightly to 4.5% from 4.4% in October. The payroll boost was an improvement from the October number of 79,000. Both S&P 500 and NASDAQ futures reacted positively to the data and are now posting gains.

This was also positive news for the Federal Reserve as the report is indicating the economy was behaving well; neither overheating nor weakening substantially, despite a weak housing sector. This offers additional support for Chairman Bernanke's current position of doing nothing with interest rates despite market expectations to the contrary. Don't Fight the Fed!

Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.