The Federal Reserve will have a lot to ponder in face of a healthy labor market.

By Michael Mapes, The Responsible Mortgage Lender

As the Federal Reserve is set to meet next week to discuss key interest rates, they will no doubt focus in on the current state of the labor markets.  As one analyst stated that as long as people have jobs and are spending money the Federal Reserve has no reason to cut rates.  However, others in the financial sector believe that no matter what the labor report shows tomorrow the Federal Reserve is going to cut at least .25 bps or could shock the market and cut as much as .50 bps.  What ever happens housing continues to suffer and borrowers are still finding access to credit harder than in previous years.

The employment numbers to be released tomorrow are considered to be a lagging indicater.  This means that the unemployment rate will increase and job growth decline as the economy begins to slow down.  In turn consumers worried about the propects of lower paychecks hold on to their money instead of spending it on goods and services.  All signs in the economy point towards a recession except for the labor markets.   As long as the people are still employed expect the economy to stay out of a recession.  The Feds action next week will set the stage for the first quarter of 08.

Michael Mapes can be reached at 757.599.1810 or by email at michael.mapes@suntrust.com