Though there wasn’t much “good news” this week, which means we should have seen rates decline, we actually saw rates increase a little on the comments made by the Fed after their FOMC meeting. They had less “dour” language hinting that they may raise rates in December. Now would they? Let’s look at the data that we have so far that they also would be looking at to determine if inflation is kicking in. Consumer income was up .1% and consumer spending was up .1%. Personal Consumption Expenditure (PCE for short) was up .1%. If we annualize the spending that puts us at 1.3% increase in “the consumer’s inflation,” which is well below the Fed’s target of 2% growth. GDP was up only 1.5% which is also below their target. The cost of employing the average American worker went up .6%, which is also a modest increase. All in all, these were all very benign numbers.
Next week is…. You guessed it JOBS JOBS JOBS. We will see if unemployment stays the same at 5.1% or if it rises (bad news = lower interest rates), or if the jobless claims are higher than expected – general expectations are that the non-farm payroll will be above September reading of 142,000 at about 180,000. If it’s closer to September’s, then that may also cause investors to go to bonds, pushing the interest rates down.
As you have read in my previous notes on whether the fed will raise rates: they mainly are looking at unemployment. The employment number tells them whether the American public and economy can stand higher interest rates. So next Friday jobs jobs jobs…