Cold, Cold Feeling! Fed Interest Rate Policies and The Natural Rate of Unemployment

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

As the late Albert Collins once sang, he has a “Cold, Cold Feeling.”

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Or feeling hot, hot, hot, depending on which measure you are looking at.

Take NAIRU, the natural rate of unemployment for the USA (white line). Historically, when the U-3 unemployment rate (orange line) falls below the natural rate of unemployment, the economy is growing “hot, hot,hot” and  The Fed raises their target rate. Check out the green boxes.

What is happening now? The U-3 employment rate has fallen below the natural rate on unemployment (see pink box). But this time around, The Fed began raising their target interest rate BEFORE this happened.

nehru..png

The Fed is raising rates as US Average Hourly Earnings All Employees Total Private Yearly Percent Change SA exceeds 3% for the first time since 2009.

earningYOYfed

While wage growth is relatively hot, hot, hot, housing is getting that cold, cold feeling.

hbldfed

How about corporate debt growth (blue line)? Cold.

corpdebtyoy

Getting cold enough?

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Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

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