Fed Up Friday: Oct. 8 – 14
Full-time work is being replaced by multiple part-time jobs for Americans, and many indicators are flashing early warning signs for an imminent recession. Learn more in this week’s Fed Up Friday.
Part-Time Jobs Soar, Indicating Most Multiple Jobholders Since 2008
In numbers not seen since the financial crisis of August 2008, the number of multiple jobholders in the U.S. increased to nearly 8 million this past month. Additionally, the number of part-time jobs added was close to 500,000.This data must be taken into account when referencing “job growth” numbers that the Fed highlights as good data to inform their decisions. When someone who used to have a single, stable job is now working two different roles just to make ends meet, that isn’t a healthy economy. Unfortunately, it doubles the amount of “jobs” we added to the workforce, but they aren’t the jobs we want to see.
IMF Sentiment: Monetary Policy of Central Banks is “Part of the Problem”
Low interest rates have been the norm since the economy began its rough recovery from the collapse of 2008. Global financial leaders like Bank of Israel head Jacob Frankel are calling for the Fed to raise rates as soon as possible to avoid “boosting low-productivity sectors and hurting overall output per hour of work.”
Peter Schiff has also expressed these sentiments. “Despite the short-term pain that will surely follow, we need to raise rates now to break the addiction before it gets worse,” he said. Low rates are merely hiding the problem — not fixing it.
Data in Key Indicators: “Recession Imminent”
More people are sensing that a true economic recovery won’t happen without the refreshingly painful cleanse of a recession. Savita Subramanian at Bank of America Merrill Lynch took a look at key macroeconomic performance indicators to research evidence for an incoming recession. She looked at five current trends to determine what they’re saying about a recession: the two-year Treasury yield against the 10-year yield, ISM’s manufacturing index, building permits, temp-help job growth, and commercial/industrial loan growth.
The numbers were a bit of a mixed bag, but the overall sentiment was that a recession is on the way. Subramanian warned investors to stay vigilant and keep their eyes peeled for signs of a downturn.
September Minutes Show a Fed Divided
While the Fed minutes showcased their universal agreement that the labor market is improving (even though it’s filling with part-time jobs and multiple jobholders), there was a strong division that resulted in Janet Yellen herself breaking the voting tie. What was the division about? Prolonged low interest rates. As one FOMC participant said, “The protracted period of very low interest rates might be encouraging excessive borrowing and increased leverage in the nonfinancial corporate sector.”
Many at the Fed are starting to grumble that artificially low interest rates would begin to cause a state of massive hyperinflation that will dismantle the weakened economy.
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