The Fed, The Job Market, and the First Rate Hike in More Than Nine Years

mikelarson-150Nothing matters more to the Federal Reserve than jobs.

That’s what I’ve learned above all else in my 18 years of following the stock and interest rate markets closely. If the U.S. economy is creating jobs at a healthy clip, then the chance of interest rate hikes goes up dramatically.

That lesson has never been more applicable than it is today. Why? Well, we haven’t seen an interest rate increase in this country since June 29, 2006.

Here’s the press release the Fed put out that day: .

It seems like it was written in another century, doesn’t it? The housing market was just in the process of topping out — something many investors hardly noticed because the economy was growing nicely and the stock market was at then-record highs.

Few were expecting even a mild downturn, much less the Great Recession that loomed right over the horizon. But thanks to the cumulative impact of the Fed’s multiple hikes in 2005 and 2006, that’s exactly what we got.

Editor’s Note: 5 best ways to profit from rising interest rates

Fast-forward to present day. We just learned from the Labor Department that the U.S. economy created 215,000 jobs in July. That was right in line with estimates, as was the 0.2% gain in average hourly earnings. The last two monthly reports were also revised higher by a combined 14,000 employees.

The unemployment rate also held steady at a seven-year low of 5.3%. Plus, job growth was also fairly widespread by industry. Retail added 36,000, health care added 28,000, finance added 17,000, and even manufacturing gained 15,000 positions.

The fly in the ointment was mining (which includes energy-related activities). That sector shed 5,000 jobs last month, bringing total losses to 78,000 since December. Labor force participation also remained dismal at 62.6%.

But if you add it all up, you find nothing that’s negative enough to steer the Fed off the path it has laid out.

Multiple policymakers — from Chairman Janet Yellen on down to the regional Fed bank heads – have indicated they want to raise rates. They’ve reiterated that message in speeches, press conferences, and background interviews with key, clued-in financial reporters.

Bottom line: Thanks to the ongoing strength in the job market, we could be staring … finally … at a rate hike for the first time in more than nine years!

That will have all kinds of impacts on the stock market, the bond market, the interest rates you get when you apply for a mortgage or auto loan, and more.

The key question for you, then, is “Are you prepared?” Do you know what to expect? How can you protect yourself – and profit – from this important seismic shift in rates?

I’ve been warning investors about this looming crisis for some time now. But now things are about to change. The situation is so critical that I recently updated my online investing course titled, “How to Profit From Changing Interest Rates”.

I created this course to help you sidestep this crisis and turn rising interest rates into a giant profit opportunity.

Click here now to watch the first session.

Until next time,

Mike Larson