Our priority is to maintain control

The Federal reserve recently stated that it will refrain from further raising interest rates. However, the situation in the labour market suggests that without such adjustments will not succeed.

In January it was 304 created thousands of jobs, while economists predicted that this figure will be only about 170 thousand. And even given the fact that in the previous 2 months he was on 70 thousand less, than was considered earlier, such activation is not surprising.

First of all, it should be noted that it occurred in a period when the Federal government suspended its activities, and the contractors performing government contracts, are left without funding and therefore were not particularly interested in hiring new employees. Nevertheless, the unemployment rate for this period increased very slightly (from 3.9 to 4%) and is likely to drop again once the situation has stabilized.

Confident the situation in the labour market contrasts with data about what the economy growing negative trends. However, at the same time, the activity index of the industrial sector, according to the Institute for Supply Management, following an unexpected fall in December was again restored. Perhaps the weakness of the economy is only imaginary and is associated with a temporary decline in confidence and not to any particular problems. And if the company for another couple of months will continue to be as confident to create new jobs, it will be possible to state that the overall situation quite well.

From the point of view of the fed, it is important that the development pace was not too fast, since in this case increases the risk of an uncontrolled development of events. For this purpose, and applied an interest rate increase, which, however, it is really possible to abstain, while the inflation rate below a certain limit. But if employers are forced to raise salaries to the decline of unemployment to attract new employees and retain existing, to deal with rising prices have by increasing rates, while Chairman of the fed Jerome Powell believes that this is not necessary.
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