The national Unemployment Report for the previous month is released the first Friday of each month. The report for January 2019 falls on February 1st, 2019. But what makes this unemployment report significant? It’s results could potentially initiate a series of events that lead to a rise in interest rates.
As businesses grow, they create jobs that give people more money to spend. This money goes back to businesses and then more jobs are created. The direct effect of this is that demand allows prices to rise and workers to ask for higher wages due to having more jobs to choose from. This is inflation. But too much inflation can backfire, making prices too high and common goods too scarce to afford, especially in lower brackets. To combat this, the Federal Reserve (Fed) raises interest rates to slow growth.
In December 2018, over 300,000 jobs were added to the economy. This was more than analysts were expecting. If January shows another strong increase in jobs, the Fed may increase the federal funds rate or interest rate that banks charge each other. Banks then pass on this cost to borrowers, so home buyers and other consumers taking out loans end up paying more.
Analysts have already been forecasting a rise in interest rates in 2019, but when and how much could be influenced by the upcoming Unemployment Report. It certainly won’t be anything major, but there will be points throughout this year when we’ll see some changes and odds are this could be one of them. So, if you’re thinking about buying a home this year, keep your eyes on the news.
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