Consumer credit creep

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Kai Ryssdal (1:05)

On the program today, a couple of stories about the cost of money and its side effects. We'll talk about the farm economy and we'll grab a cup of coffee. From American Public Media, this is Marketplace.

In Los Angeles, I'm Kyle Rizdahl. It is Monday today. This one is October the 19th, good as it always is to have you along, everybody. We are going to begin this week by looking back. Not that far, middle-ish of last week and the inflation data we got for the month of September. Consumer price index, say it with me now, up 3.7% over the past 12 months. The producer price index up 6.3%. We didn't talk about this one, but the import price index, just like it sounds, a measure of inflation for imports into this economy, jumped more than 8%.

All that data is of course going to be front and center when the Federal Reserve meets next week. And the central bank is going to do what the central bank's going to do on interest rates at that meeting. So prognostications will be forthcoming here. Instead, a humble reminder that stable prices is only half of the Fed's job. Maximum employment is the other half. And as Marketplace's Justin Ho reports to GetUsGoingNow, whatever Chairman Warsh and the gang do on rates is going to affect the labor market too.

Justin Ho (2:37)

It's safe to say that the Fed is a little more concerned about controlling inflation than it is with the labor market. That's because inflation has been so hot and the labor market hasn't. It hasn't been cool either. It's just kind of there.

Preston Moy (2:50)

The thing I've been telling people is just that the labor market is actually, frankly, quite boring right now.

Justin Ho (2:54)

That's Preston Moy, Senior Economist with the advocacy group Employ America. He says boring isn't bad.

Preston Moy (3:00)

There are parts of it that are sluggish, such as wage growth and hiring, but we're not seeing any sort of imminent collapse either. And so I think that's why the Fed feels comfortable shipping its focus towards inflation.

Justin Ho (3:12)

If the Fed raises rates, some industries are likely to shed jobs. Think about housing. Courtney Schuper, an economist with macro policy perspectives, says higher mortgage rates discourage new buyers.

Courtney Schuper (3:23)

Simultaneously, home builders face higher financing costs, which results in less construction activity and less hiring in that sector.

Justin Ho (3:31)

Schuper says companies that use a lot of temp workers are likely to shed them as rates go up.

Courtney Schuper (3:36)

We've already seen temp jobs slow slightly. They lost 11,000 jobs in the month of September, but I would expect that to potentially slow a bit more just in reaction to the higher interest rates.

Justin Ho (3:49)

Higher rates would also make things even harder for people who are already facing an uphill struggle to find work and longer and longer job searches.

Kelly Wells (3:57)

As you raise interest rates, those workers on the margin who are already facing a more volatile labor market will find it much harder to find a job.

Justin Ho (4:04)

That's Kate Bond, chief economist at the Institute for Women's Policy Research.

Kelly Wells (4:08)

That means they're more likely to accept a worse job because lower income growth and worse benefits because they have to.

Justin Ho (4:15)

Bond says when interest rates go up, it can take anywhere from six months to two years before labor markets feel it. I'm Justin Ho for Marketplace.

Kai Ryssdal (4:23)

Wall Street today, traders seem to have decided technology stocks are okay after all, which is interesting seeing as how there are going to be a whole lot of tech earnings coming later this week. We will have the details when we do the numbers.