Silver Professionals: On the menu: Thriving economy..The ingredients: Jobs & Housing

On the menu: Thriving economy..The ingredients: Jobs & Housing

Silverprofessionals.com and chicagoluxuryrealty.com..

Base of our economy!

The job growth is encouraging even when government data revealed that Federal, State, and local governments cut 11,000 jobs. By no means is the US Economy out of the woods though. When it comes to American workers, the bigger picture shows nearly 12 million people, or 7.5% of the population, remains unemployed. The unemployment rate does not include people who have not looked for work in the prior four weeks (known as the participation rate). We are not without continued problems in the US Economy as the labor participation rate fell to a 34 year low. The picture is especially troubling for people aged 20-24 looking for work as unemployment is at 13% for these young workers.

Compared to historical levels, the overall unemployment figures are quite high. Prior to the Great Recession, unemployment averaged approximately 4%. Nonetheless, the Federal Reserve sees that there is some degree of growth and stabilization in these figures as the overall unemployment rate is dropping.

The Fed has sent a clear message linking their interest rate outlook (and how they will adjust short term rates) to economic thresholds. Bernanke has said, interest rates will stay low at least as long as unemployment remains above 6.5% and if the Fed projects inflation of no more than 2.5% one or two years in the future. Officials at the Fed don’t see joblessness falling near that goal until 2015.

It is important to understand what Bernanke’s Federal Reserve is trying to do here. The markets, and multiple asset classes at large, have responded to one of the most powerful tools the Fed has as a resource, “FED-SPEAK.” Nothing more than the action of saying “we may look to taper the amount of stimulus we are injecting into the US Economy” has jolted both the bond and stock markets. This comes at a fragile inflection point in the recovery when we are seeing some improvement in data on the US economy. The Fed needs to tread lightly here so they do not choke off the recovery we have made thus far. We believe the Federal Reserve will maintain their commentary and track in letting the markets know they will remain “accommodative” until they consistently see strong US economic growth.