Wednesday, February 07, 2007
US unemployment on the increase
US unemployment has risen to a four month high of 4.6% after fewer new jobs were created last month than expected. Analysts said figures showing that 110,000 new jobs were created in January were disappointing, but still reflected steady growth in the market. At the same time, a separate report showed that US consumer sentiment hit a two-year high in January. The figures will be welcomed by the Federal Reserve as they suggest US economic growth is not overheating. Noting that the economy was in "firmer" shape, the Bank opted to keep interest rates on hold at 5.25% on Wednesday.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6324707.stm
The rising unemployment rate in the US suggests that the threat of wage-push inflation is still weak, as would be predicted by the conventional Phillips curve trade-off. Of course, given that consumption expenditure is a key component of aggregate demand, one would expect that the American economy should overheat in the medium/long run. In that case, the Federal Reserve would have to consider raising the baseline interest rate in order to curb any inflationary pressure from developing. Nevertheless, given that it approximately takes 2 years for the effects of monetary policy to permeate the economy, the decision by the authorities to alter the interest rate requires adequate foresight!
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 7 and 16 explain the dynamics underlying the trade-off between unemployment and inflation (at principles and intermediate level, respectively). Similarly, from Chapters 4 and 10 one can understand how consumption expenditure (C) affects the overall level of aggregate expenditure (AE) in the economy. Finally, the responsiveness of monetary policy is discussed in Chapters 5 and 11 (at principles and intermediate level, respectively). Find out how to get LiveEcon at www.liveecon.com. Download this blog as a Blogcast via the website.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6324707.stm
The rising unemployment rate in the US suggests that the threat of wage-push inflation is still weak, as would be predicted by the conventional Phillips curve trade-off. Of course, given that consumption expenditure is a key component of aggregate demand, one would expect that the American economy should overheat in the medium/long run. In that case, the Federal Reserve would have to consider raising the baseline interest rate in order to curb any inflationary pressure from developing. Nevertheless, given that it approximately takes 2 years for the effects of monetary policy to permeate the economy, the decision by the authorities to alter the interest rate requires adequate foresight!
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 7 and 16 explain the dynamics underlying the trade-off between unemployment and inflation (at principles and intermediate level, respectively). Similarly, from Chapters 4 and 10 one can understand how consumption expenditure (C) affects the overall level of aggregate expenditure (AE) in the economy. Finally, the responsiveness of monetary policy is discussed in Chapters 5 and 11 (at principles and intermediate level, respectively). Find out how to get LiveEcon at www.liveecon.com. Download this blog as a Blogcast via the website.
# posted by Sam @ 14:05 
