Reuters Reports, Essay Example

An online article on Reuters reports that growth slowed in July this year as well as unemployment rate rose which may give a reason to U.S. Fed to keep interest rates low. The economists expected job gain of 233,000 versus the actual job gain of 209,000 in July. Anotherdisappointing news in the labor market is a rise in the number of people who want to work but have given up or those working part-time because they cannot find full-time employment. The article also reports that U.S. Treasury debt prices rose as fewer traders expect the Fed to push up rates in the first half of next year(Mutikani).

The article improves our understanding of the economics concepts studied. Since the progress in the labor market has been below expectations, it makes sense for the Fed to keep interest rate low. When interest rate is low, it is cheaper for businesses and individuals to borrow money to fund their investment and consumption activities, respectively. This has a positive impact on the labor market as businesses have no choice but to hire more workers to support rising production of goods and services. As a result, unemployment rate falls.

It also makes sense that U.S. Treasury debt prices would rise because fewer people now expect the interest rates to rise next year. This is because interest rates and treasury debt prices have an inverse relationship. Initially, more people expected the interest rates to increase, hence, the decline in treasury debt prices. But now many have revised their future expectations regarding the direction of the interest rate which is why treasury debt prices rose in July.

Work Cited

Mutikani, Lucia. U.S. job growth cools, unemployment rate rises. 1 August 2014. 3 November 2014 <www.reuters.com/article/2014/08/01/us-usa-economy-idUSKBN0G134N20140801>.