Beyond that, I wouldn't be surprised if the Fed under Yellen lowers the unemployment-rate threshold that could trigger an increase in interest rates. A number of years ago, the Fed introduced this idea of a 6.5% unemployment threshold for considering rate hikes. But that threshold is almost certainly out of date. That's because the unemployment rate continues to drop for the wrong reasons: We keep getting a decline in the number of people looking for work. The Fed wants strong job growth, not people abandoning the labor force. And so it has to decide whether to throw it away or go to lower the level. Our feeling is the Fed will lower it to 6% or perhaps 5.5%.
And how long would we expect that unemployment rate to stay at 5.5%?
The following chart shows the 30 year moving average of the unemployment rate.
Click to enlarge.
Note that 5.5% seems like a pipe dream over the long-term (unless we can somehow magically undo the permanent damage done in the 1970s).
Yellen love you long time.
(Shame on me for going there, lol. Sigh.)
Source Data:
St. Louis Fed: Unemployment Rate
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What to Expect From Janet Yellen's Fed (Musical Tribute) Updated at :
5:53 AM
Wednesday, January 29, 2014
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