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Offshore jobs on US job market
While the US job market improves, the central bank faces a new concern; Analysts expect that supports the influence of low oil prices on inflation.
For months, the Federal Reserve has been obsessed with jobs, jobs, jobs. It is hiring strong enough in the United States? And what about wages? But now there is another wild card in the cards as the Fed considers when to raise interest rates: oil.
The stock market has just suffered its worst week in years with a dramatic fall in oil prices. So, investors and economists wonder whether the company will discuss (or should discuss) the potential impact of lower energy prices in their inflation forecasts.
The Bank meets this week and formally issue a policy statement Wednesday. Traders will be watching to see if the Fed finally abandoned the term "considerable time" of his statement, a language used to describe the time you think you should keep interest rates near zero.
Weaver thinks that the Central Bank will have to talk about how oil can be a factor that is maintaining relatively low inflation, either in your statement or during the press conference of the president of the organization, Janet Yellen. That's important because inflation is a key factor that the Fed watches when making decisions. The other is the job market.
As the unemployment rate continues to fall and the economy added jobs this year to the highest rate since 1999, the Fed should finally feel comfortable raising rates sometime in 2015. These have been near zero since December 2008.
The lack of inflation has to be a concern too large. The company has two official tasks or mandates: to try to maximize employment and keep prices stable.
If oil prices continue to fall and the prices of other goods continue that trend, that could be a sign of a weakening economy and deflation. Increases in interest rates would not be a great idea if the economy remains fragile.
Therefore, Weaver thinks the Fed will continue to indicate that any policy change will depend on the data, not the calendar.
"Yellen want to keep your options open," he said. "People are scared and nervous now. Anything can be a turning point for the job market and the Fed does not want to be the turning point."
Quincy Krosby, market strategist at Prudential Financial, said the Fed should show more concern about what's happening with oil.
Two key Fed officials said earlier this month that the drop in oil energy prices was a good thing because it should help boost consumer spending. But after prices have sunk more since then, Krosby said they might have to reassess that argument.
"You can see how oil at lower prices helps the US economy, but this is not an equation that is equal in both directions. It could be a sign of weakness in Europe, China and Japan. Besides, you start to hear about job cuts in the domestic energy industry, "he said.
Bond investors seem to be betting that the Fed will keep the caution. That is probably due, in part, what's happening with oil. The yield on the benchmark 10-year US Treasury is currently 2.12%, not far from the lowest point of the year of 1.87%.
If the bond market expected rates to rise sooner rather than later, investors would be more willing to sell bonds and further boost their yields.
The adjustment could mean the end of layoffs in the US industry in recent months; spending cuts have produced a better grounded industry experts said.
It may have been behind the terrifying days for the oil workers.
Oil prices are finally rebounding, and that surge is causing cautious optimism. This week oil climbed back above $ 60 a barrel for the first time since December.
That is good news for people across America that relies on the oil industry for a living. US firms cut 52,000 oil jobs since the oil crisis began in May estimated the outplacement firm Challenger, Gray & Christmas earlier this month.
"The worst has passed. This consolidation is almost finished, "he told CNNMoney Joe Brusuelas, chief economist at consultancy McGladrey, last Wednesday in the corridors of SkyBridge Capital SALT Conference in Las Vegas.
Although the price of oil remains dramatically low compared to more than a year ago (it stood at $ 100 in May), due to a massive oversupply, significant from their lows of $ 44 rally technically means oil is in a bull market again.
"No sooner than $ 40 in the short term," he said.
Brusuelas recognized that although cheap gasoline has been a positive contribution to the overall US economy, led to hard times as energy centers in Houston, Oklahoma City and North Dakota.
Nonfarm payrolls fell by more than 25,000 oil jobs in Texas in March, the biggest drop since the Great Recession. JPMorgan Chase even warned late last year that the lone star state could sink into a recession.
However, Brusuelas believe that layoffs in the oil industry will be modest because oil prices have recovered and at least until now have not returned to the lows of 2015.
That confidence about the worst is over in comments echoed last week by T. Boone Pickens. The oil billionaire told CNNMoney that people in Texas should not panic because oil prices are going to end the year at around $ 70 a barrel and that can reach between 90 and 100 dollars in 12 to 18 months.
Although layoffs have been very painful for many Americans, Brusuelas said "the industry has a stronger foundation now."
This is because companies like Schlumberger, Halliburton and Baker Hughes drastically reduced their workforce and cut costs (and oil jobs) in response to lower oil prices.
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