Doubts Swirl around Fed Rate Hike

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By Jacob Maslow

US Federal Reserve
The US Federal Reserve in Washington DC on a beautiful summer day

Considering all the bad news from global markets and global growth forecasts, as well as stock market turbulence caused by the strong dollar, doubts are beginning to swirl around the possibility of a Fed rate hike. A Fed rate hike, at a time when the U.S. economy might catch the global economic slowdown contagion, is ill-advised at best. At worst, it is like pouring gasoline onto glowing embers.

Make no mistake about it, there are glowing embers of potential weakness in the U.S. market. The recent healthy jobless rate figures mask historically low labor market participation by the prime 25-45 year old age group. An alarming percentage of people in this age group have simply given up looking for work.
Another worrying sign, that all is not well with the U.S. recovery, is that most of the new jobs being created are actually low-wage jobs. This partly explains why the median household income in the United States is at the same level as it was eight years ago. The median household in the United States is actually earning less. This calls into question the American dream, and the concept of intergenerational economic progress. When paired with the threat, posed to the earnings of multinational U.S. companies, by the strong dollar, doubts are increasing that the Federal Reserve will hike rates.
If the Federal Reserve hikes interest rates, this will push the U.S. dollar even higher, and increase the pain on the earnings of multinational U.S. companies. Considering the underlying threats to the U.S. recovery, is a rate hike worth the risk?
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