By Isaac Cohen*
Before the end of 2014, the US central bank said it could be “patient” about increasing interest rates, with inflation remaining under the 2 percent objective for the last 31 months. The last report on last December employment justifies such patience, despite the fact that job creation in 2014 reached 2.95 million, the best in 15 years, comparable to the figure of over 3 million jobs created in 1999.
Last year, average monthly job creation was vigorous at 246,000, compared to 194,000 in 2013, with the unemployment rate in December declining to 5.6 percent, from 5.8 percent in November. However, hourly wages decreased 0.05 cents last December, bringing the increase in salaries for 2014 to 1.7 percent, barely close to the rate of inflation.
In theory, a vigorous increase in employment as last year’s should lead to an increase in the demand for labor and to wage increases. Stagnant wages and low inflation favor employers, because there is no pressure to offer better salaries to increase hiring.
Therefore, the latest employment figures confirm the central bank’s “patience” and some analysts anticipate that, instead of mid 2015, interest rate increases will start in 2016. As declared by the President of the Federal Reserve Bank of Chicago Charles Evans, “I just don’t see why we should be in a hurry.”
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.