To Watch the Fed, Watch Employment, April 3, 2006 Essay | Essay

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To Watch the Fed, Watch Employment, April 3, 2006

Summary: Fed officials have been quite explicit that they are raising interest rates because of the threat of inflation that is the direct result of vanishing resource capacity. The scarcity that concerns them most is the declining unemployment rate. Friday brings the latest installment in the payroll employment report, surely the most critical piece of data used by the Fed to gauge how much to raise interest rates. Indeed, it will be very important to observe if job growth remains strong continuing the rebound from the artificially slow fourth quarter.
Fed officials have been quite explicit that they are raising interest rates because of the threat of inflation that is the direct result of vanishing resource capacity. The scarcity that concerns them most is the declining unemployment rate. Friday brings the latest installment in the payroll employment report, surely the most critical piece of data used by the Fed to gauge how much to raise interest rates. Indeed, it will be very important to observe if job growth remains strong continuing the rebound from the artificially slow fourth quarter.

Labor is the single most critical component of business costs of production, accounting for more than two-thirds of the cost of producing GDP. Therefore, it is inconceivable that labor costs can accelerate for long without driving up the broadest measures of inflation. Symmetrically, it is equally inconceivable that a sustained rise in inflation can occur without a commensurate rise...

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This section contains 439 words
(approx. 2 pages at 300 words per page)
Buy the Student Essay on To Watch the Fed, Watch Employment, April 3, 2006
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