Connect These Dots: What Worries the Fed?

The Federal Reserve delivered a rather mixed message on Wednesday. On the one hand, it removed the one word on which everybody had become fixated: patient. But it also lowered its outlook for growth, and seemingly backpedaled from raising interest rates over the next few months.

“We really need to focus on the jobs picture,” said Jason Meister of Aivson Young said this morning on the MoneyBeat show. “If we were doing so great and the economy was doing so well we would actually raise rates. And we’re not. We’re pushing it off.” The unemployment rate, currently at 5.5%, is misleading, he said.

This becomes apparent when one considers the labor force participation rate, a measure of the number of people who could be working who either are working or looking to work. This measure remains near multi-decade lows, meaning the unemployment rate is low at least partially because there are a lot of people not working who aren’t being reflected in the official unemployment rate.

“The Fed knows that, and that’s why they’re pushing it off and are dovish.”

Source: http://blogs.wsj.com/moneybeat/2015/03/19/connect-these-dots-what-worries-the-fed/