mortgage

Fed affects banks, rates, prices and jobs

The job market
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The job market

You probably never thought of the Fed the last time you updated your resume. But the Fed is thinking of you. At every meeting, the FOMC considers labor market data as they make decisions aimed at lowering the unemployment rate to about 5.5 percent or 6 percent. They look at numbers such as payroll changes, hiring, the labor force participation rate and duration of unemployment.

The Fed can only indirectly affect the job market, by lowering interest rates to encourage more borrowing. That prompts businesses to take out loans to purchase new machinery or invest in new equipment and encourages consumers to borrow in order to buy goods and services, Faucher says.

"That increases aggregate demand. Then businesses are producing more and they need to hire more workers," he says. "That in turn leads to a better labor market and lower unemployment rate."


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