Monday Moneybeat: No Change in Fed Rate

MARY REICHARD, HOST: Coming next on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: The Federal Reserve meets this week to set interest rates, and you’ll do well to remember the words of the Fed chairman last month: that current rates are likely to stay right where they are—unless the positive economic news turns bad. That’s a paraphrase.

Generally speaking: Fed policy is to cut rates to stimulate the economy and raise them to try to keep the economy from overheating and sparking inflation.

So given what chairman Jay Powell told Congress in November, then, nothing short of economic catastrophe at this point is likely to push the Fed to cut rates a fourth time this year. 

Bear in mind, the central bank raised rates eight straight times after the election of President Trump: all the increases coming 25 basis points at a time, adding up to two full percentage points. Then, the Fed backed off and this year made three cuts of 25 basis points each.

But two factors point to the Fed’s standing pat, that is, leaving interest rates alone: The central bank published the last of its eight economic reports this year, and its so-called “Beige Book” at the end of November was much more upbeat than the previous one. Then came the jobs report for November, and it beat expectations, and dropped the unemployment rate to 3.5 percent.

Meaning, the Fed’s likely to conclude that the economy is humming right along and needs no help.

REICHARD: More on the November jobs report in a moment, but release of that report turned the stock market on Friday—to propel the benchmark Standard & Poor’s 500 stock index to a second-straight winning week. 

The S&P 500’s Friday gains erased all the week’s losses to that point. The Dow Jones Industrials and the Nasdaq posted strong gains, too, but they weren’t enough and both ended the week down one-tenth. 

Driving the markets down during the week were signs that trade negotiations between the United States and China remain at loggerheads.

EICHER: Now that jobs report: American employers added 266,000 new jobs in November. For context, that’s the best performance since January. The strong November report pushed up the 2019 average to 180,000 jobs per month, and that puts us firmly on pace for another year of 2-million-plus net new jobs. Average hourly pay is up, too. Worker paychecks, 3.7 percent bigger year on year. 

Let’s dive deeper: The ranks of the marginally attached—that is, those able to work but not actively seeking work—has declined by more than a fourth, 27 percent down, year on year. 

Among those classified as long-term unemployed, and we define that as out of work six months or longer, that number has plummeted to below 21 percent. 

Again, some context: the number of long-term unemployed reached a high point of more than 45 percent back in September 2011.

After now 110 straight months of net job growth, the number of Americans in their prime working years, meaning between the ages of 25 and 54, is at its highest point since January 2007: 80.3 percent. That is, 8 in 10 of those Americans have jobs.

And that is today’s Monday Moneybeat.

(AP Photo/Richard Drew, File) In this Nov. 7, 2019, file photo traders Jeffrey Vazquez, left, and Edward Curran work on the floor of the New York Stock Exchange. 

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