U.S. Job Boom Halts Rate Cuts: What It Means for Your Wallet
The U.S. economy generated a whopping 336,000 jobs in September, doubling the anticipated figures. While the wage growth remained moderate, this overheating indicator is expected to prompt the Federal Reserve to keep the interest rates elevated.
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Good News or Bad News?
It’s a paradox where good news also spells bad news: The U.S. churned out 336,000 jobs in September, exceeding the forecasted 170,000 and the twelve-month average of 267,000, with the unemployment rate holding steady at 3.8%.
This robust job market performance was applauded by President Joe Biden, who took to X (the erstwhile Twitter) to boast about his track record since taking office in January 2021:
- “This accounts for nearly 14 million jobs – with 815,000 in the manufacturing sector – all thanks to Bidenomics,” bragged the President, who later delivered a speech at the White House.
- “The unemployment rate has remained below 4% for twenty consecutive months; the longest stretch in fifty years.”
A Conundrum for The Federal Reserve
However, this figure poses a challenge for the Federal Reserve (Fed) tasked with reining in inflation to 2%, currently standing at 3.7% annually.
Consequently, the markets are bracing for a sustained high interest rate environment, with ten-year interest rates soaring to 4.85% – one of the highest levels since the era preceding the great financial crisis of 2008 – before settling at 4.79% at close, which is still substantial.
The 2008 Financial Crisis in the U.S.
The 2008 financial crisis, often dubbed as the worst financial disaster since the Great Depression, originated in the United States due to a confluence of factors.
The housing bubble burst was a primary catalyst, fueled by subprime mortgage lending and an overvaluation of assets. When the bubble burst, it led to a sharp decline in house prices, triggering severe repercussions across the financial system.
Financial institutions faced insolvency as mortgage-backed securities tied to American real estate, as well as a vast web of derivatives linked to those MBS, collapsed in value.
The crisis rapidly morphed into a global economic downturn, leading to significant financial strain worldwide. In the U.S., the aftermath included massive job losses, plummeting consumer spending, and an unprecedented government intervention in the financial markets and the economy.
The crisis also prompted a thorough re-evaluation of global economic policies, regulatory frameworks, and a rethinking of how financial markets and institutions are governed.