Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How the Fed Is Hurting U.S. Manufacturing

Interest-Rates / US Federal Reserve Bank Sep 13, 2015 - 02:25 PM GMT

By: Investment_U

Interest-Rates

Sean Brodrick writes: Whether he deserves it or not, Obama is getting kudos on his handling of the economy, particularly the declining unemployment rate. In August, the official headline unemployment rate dropped to 5.1%. But that same jobs data out of the Bureau of Labor Statistics (BLS) contained some sobering news: Manufacturing payrolls are getting shredded.


Yikes!

As you can see, 17,000 manufacturing jobs disappeared in one month. The only reason the unemployment rate is going down is more service jobs - everything from bartenders to home healthcare workers - are being created.

The BLS reported: “Job losses occurred in a number of component industries, including fabricated metal products and food manufacturing (-7,000 each). These losses more than offset gains in motor vehicles and parts (+6,000) and in miscellaneous durable goods manufacturing (+4,000).”

The source of good jobs for America’s workforce is being hollowed out and replaced with bartenders.

Should we blame Obama for this? After all, he’s getting the credit for low unemployment; he should also get the blame, right? Maybe.

But if you want to blame anyone, first in line should be the U.S. Federal Reserve.

The Fed has been making a lot of noise about raising its benchmark interest for months. In an environment where other central banks around the world are cutting rates, this anticipation of higher rates pushes the U.S. dollar higher.

In the last year, the U.S. Dollar Index has increased nearly 15%. At the same time the Yen has lost more than 11% of its value, the euro nearly 14%, the Canadian dollar 16% and the sad-sack Australian dollar more than 20%.

Ouch!

As our currency rises, our manufactured goods become more expensive in foreign countries. The pain is doubled if the country’s currency is falling at the same time.

So why is the dollar so strong?

It is partly due to economic forces - both Canada and Australia are in recessions now thanks to falling prices in natural resources. But the Fed’s promise of a rate hike is a major factor.

Again, money from around the world is being parked in greenbacks in anticipation of that rate hike.

Am I saying the Fed shouldn’t raise rates next week?

Not necessarily. I can see the argument of those who say the Fed should sit tight.

  • The market is on a roller coaster right now.
  • While parts of the U.S. economy, including real estate, healthcare and consumer services, are shifting into higher gear, there are big layoffs in the energy sector.
  • A lack of liquidity in the bond market has many analysts sounding the alarm.

On the other hand, I’d hate to think our economy is so frail that the Fed can’t raise its benchmark interest rate by a measly quarter point without triggering a financial earthquake.

A big part of the problem is that the Fed keeps delaying its rate hike. In fact, if and when the Fed finally hikes rates, I’d expect to see a “sell the news” reaction that could send the U.S. dollar lower.

My message to the Fed would be: “Poop or get off the pot.” Either raise rates as you’ve been hinting at for the last three meetings, or put them off the table for the rest of the year.

There are some things you as an investor and consumer should and shouldn’t do before the Fed hikes rates.

  • If you’re going to buy a home, lock in that rate. The same goes for a car.
  • Expect downward pressure on bonds. But also remember that yields on short-term money market instruments will remain low for another year at least. That means little competition for bonds of longer maturity or lower credit quality. So, there’s no need to panic out of any positions.
  • Have a cash reserve ready. A fed rate hike may spark a short-term panic in stocks. They’re looking toppy anyway, and September is historically a month associated with market corrections. So, if bargains present themselves, consider jumping on them. The long-term trend in stocks is up.

Meanwhile, we’ll watch to see what kind of blame or credit goes to the folks in Washington. There is no doubt the Fed has misjudged the power of its decisions.

It’s created ripples across the economy.

Good investing,

Sean

Source: http://www.investmentu.com/article/detail/47501/interest-rates-fed-us-manufacturing#.VfVqhU3bK0k

http://www.investmentu.com

Copyright © 1999 - 2015 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in