Interest rates aren’t going up anytime soon

Sep 18, 2014 15:56 UTC

Rate hikes are still a ways out: that was the message from Janet Yellen and the Fed yesterday after the Federal Open Market Committee’s statement came out. However, Yellen also hinted that once interest rates do start to rise, they could go up faster than many currently expect. Rates are currently lower — and have stayed low for longer — than in any recovery in recent memory. Here’s what interest rates have looked like in every recovery since 1982:

ratehikes1

And here’s a breakdown of how long it has taken the Fed historically to raise rates:

ratehikes2

Wage growth: Still stagnant

Jun 27, 2014 18:07 UTC

Reuters has a story out this week delving into Fed chair Janet Yellen’s views about employment. Yellen wants to see more wage growth before she really believes the employment situation is improving, as “research from the Fed’s staff and her own past academic work both suggest there may be more slack in the economy than inflation hawks believe,” according to the Reuters piece.

But wage growth continues to be stagnant:

productivity-growth

Here are more details about her research:

Her research outlined a number of possibilities, including that companies realize upsetting workers may only cost companies more in the long run as some will quit or become less productive, while rehiring in a recovery will prove more costly.

But a flip side is that, as economies recover, firms make up for the lack of wage cuts by keeping worker pay constant for as long as possible.

The San Francisco Fed, where Yellen served as president until 2010, tracks the percentage of workers whose wages did not rise in the prior year. The bank’s “Wage Rigidity Meter” remains near an all-time high – evidence it will take more time before the type of wage-growth Yellen hopes to see.

COMMENT

Unemployment in the U.S. is just north of 6%. Unemployment amongst recent college grads is over 8% and UNDEREMPLOYMENT is over 16%. 16% of recent college grads are hungry enough for work that they’ll take anything and there’s a huge slug of new grads coming right behind them. There may be a shortage of workers with some particular skills set but I can’t see wages in general rising when there are so many kids with reasonable credentials sitting on their hands.

Posted by WCTopp | Report as abusive
  • # Editors & Key Contributors