Job Openings and Labor Turnover Reports Could Lead to a Fed Decision to Increase Interest Rates

November 2015

Last Thursday’s JOLTS (Job Openings and Labor Turnover Survey) release reported little change in job openings and hires and separations, underscoring a continued trend of a strengthened U.S. labor market. The JOLTS report follows the publication of the healthiest monthly jobs report for 2015, which reported a 271,000 gain (far exceeding economists’ projections).

The increased stability of the labor market coupled with the fact that the Fed hasn’t raised interest rates since July of 2006 has led to predictions of rate hikes since March of this year. The robust October jobs report and steady JOLTS report has furthered speculation that the raise will occur following the conclusion of the Federal Open Market Committee’s next meeting on December 15-16.

Janet Yellen, Chairwoman of the Federal Reserve, during a testimony before Congress earlier this month, referred to a December interest rate hike as a “live possibility."

“The economy has been performing well, and we expect it to continue to do so," Yellen said. 

However, Yellen was careful to point out that the rate hike would be moderate, saying, “We continue to expect that economic conditions will evolve in a manner that will warrant only gradual increases in the target federal funds rate.” Yellen also was clear in stating that no official decision on raising interest rates had been made.

Though some disagree with raising interest rates citing low inflation and a real unemployment rate higher than reports suggest, others believe that keeping interest rates low or even waiting too long to raise them would necessitate an eventual abrupt rate increase, which could run the risk of another recession.

Several Fed officials have issued statements to support interest rate hikes following the release of the October jobs report, leading many to theorize that the announcement will come before the end of 2015.

The December meetings would be the last chance for the Fed to increase interest rates in 2015, with the next meetings not taking place until January 26-27 and March 15-16.