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Affecting 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, monetary policymakers consider labor market data as they make decisions aimed at achieving maximum employment.
They look at numbers such as:
- Payroll changes.
- Labor force participation rate.
- 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, says Faucher.
"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."