Don’t Get Too Excited At The Stock Market Numbers Today

The Stock Market reached record levels today. Normally that would be cause for celebration, but if you look at the reasons behind the rise in the stock market, the news doesn’t look quite so good.

Yahoo Finance reported today that the federal government will continue putting stimulus money into the economy for the near future because the economy is not growing at a satisfactory rate.

The article reports:

The Fed predicted Wednesday that the economy will grow just 2 percent to 2.3 percent this year, down from its previous forecast in June of 2.3 percent to 2.6 percent growth.

Next year’s economic growth will be a barely healthy 3 percent, the Fed predicts.

Fed officials decided to continue their $85-billion-a-month bond purchase program, surprising most economists, who had expected a slight reduction. The bond purchases have been designed to keep long-term loan rates low to encourage spending.

So what has this got to do with the stock market? Financial people expected the Fed to begin to slow its bond purchases, which would have begun the rise of interest rates. Right now, with interest rates at record lows, and the possibility of inflation, the stock market is a logical place to invest. As the Fed begins to pull back from its bond purchases, the stock market will fall slightly, mortgage rates will increase, and we will probably begin to see some serious inflation.

The stock market is currently being propped up by the Fed. I have not heard any good guesses as to what will happen when the Fed begins to slow down the money flow.

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Underneath The Jobs Numbers

Yahoo Finance posted an article today that included the Labor Force Participation Rate in the latest jobs numbers.

According to the article:

The civilian labor force decreased by 37,000 to 155.80 million in July, while those not in the labor force rose by 240,000 to 89.96 million.

The decrease in the percentage of Americans in the labor force–63.4% last month from 63.5% the month before–is one of the main reasons for the drop in the unemployment rate–to 7.4% in July from 7.6% in June.

Many of the jobs added were part time jobs and many jobs changed from full time to part time. ObamaCare has created some serious problems for the American economy (ObamaCare is responsible for the growth of part time jobs) and will continue to do so until it is defunded and stopped. I am not sure if the Republicans in the House of Representatives are going to get anywhere with their attempts at defunding it, but I give them credit for trying.

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