Federal Reserve Chair Janet Yellen (Photo : Reuters)
According to a new February jobs report, the United States' unemployment rate fell to 5.5 percent and there were 295, 000 job additions. The joblessness is now within 5.2 to 5.5 percent ranges, but that doesn't seem to be a reason ample enough to be content about the economy from every angle.
The current report is a reason for merrymaking for the Federal Reserve chairwoman Janet L. Yellen who has been trying everything to bring the job market back on track for the last seven years. And, by pure traditional thinking, the Central bank has waited for a pretty long time to increase the interest rates so that the economy can be saved from overheating.
According to analysts, even when Fed leaders say that the jobs report reflects a sustainable level over the long run, there are many other points in the report that offer an idea that the economy is far from overheating.
For example, the average hourly income of workers rose only 0.1 percent, and has grown less than two percent over the last year. Moreover, the labor force now actually has lesser number of people, which means that the group of potential workers who do not have a job and are also not looking for one is expanding, not shrinking.
Many bond and currency traders now see this data as a good enough reason for an increase in the interest rates. That ultimately led to a mixed response in the financial markets and a rise in the longer-term interest rates and the dollar value on Friday morning, Bloomberg reported.
But inflation is also a major consideration for the Fed and the central bank in formulating new policies. In fact, the interest rates can only be justifiable only when a significant growth in higher-wage jobs is apparent.
"Until we see gains in higher-wage jobs, we won't see upward pressure on wages, and we won't see upward pressure on inflation," Megan Greene, the chief economist of John Hancock Financial Services, said in a note to clients.
And many analysts believe that there is a good reason for the Fed to wait for some more time now.
"I hope this would impact the timing of the Fed's next rate hike. Today's report supports the argument that the Fed should wait until at least the end of this year to start hiking rates," Megan added.
For the time being, Ms. Yellen can surely have a sigh of relief though.
