Today brings another version of the old good news/ bad news dichotomy.
First the good news: For the first time in ages we actually had a month with relatively robust job growth. No, it was not as good as some of the nearly orgasmic reports in the mainstream media would suggest, but it was still very good. Job creation at this rate would result in a slow lowering of the unemployment rate even if people stopped dropping out of the workforce. We will have to see whether this is an indicator of future continued growth or if the latest GDP report was a better indicator. Hopefully, the job number is really indicative of some stronger growth into the future.
Now the bad news: If it turns out that the job growth is real and continuing, then we are likely soon to see both rising interest rates and higher inflation. The Federal Reserve has pumped up the money supply to a point never before seen in this country, and it is still continuing on that same course. Job creation could finally convince the Fed to stop or at least slow the printing presses. Combine that move with higher demand resulting from greater employment and you have the prescription for higher interest rates and higher inflation. Of course, the only successful way known to stop inflation is to slow the economy. So we would be right back where we started.
Remember, though, these are longer term trends. Inflation will not suddenly appear next month, nor will the home mortgage rates suddenly hit 10%. Every change in the economy takes many, many months to percolate through its enormity. It is just something to remember for the future, although it is not too far away.
First the good news: For the first time in ages we actually had a month with relatively robust job growth. No, it was not as good as some of the nearly orgasmic reports in the mainstream media would suggest, but it was still very good. Job creation at this rate would result in a slow lowering of the unemployment rate even if people stopped dropping out of the workforce. We will have to see whether this is an indicator of future continued growth or if the latest GDP report was a better indicator. Hopefully, the job number is really indicative of some stronger growth into the future.
Now the bad news: If it turns out that the job growth is real and continuing, then we are likely soon to see both rising interest rates and higher inflation. The Federal Reserve has pumped up the money supply to a point never before seen in this country, and it is still continuing on that same course. Job creation could finally convince the Fed to stop or at least slow the printing presses. Combine that move with higher demand resulting from greater employment and you have the prescription for higher interest rates and higher inflation. Of course, the only successful way known to stop inflation is to slow the economy. So we would be right back where we started.
Remember, though, these are longer term trends. Inflation will not suddenly appear next month, nor will the home mortgage rates suddenly hit 10%. Every change in the economy takes many, many months to percolate through its enormity. It is just something to remember for the future, although it is not too far away.
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