Rate Cuts — Too Much? Too Late? Who Benefits?

The Federal Reserve lowered interest rates for the first time in four years. Fed members told us back in the summer a rate cut was a near certainty for its September meeting.

Most financial experts and many of the betting markets expected a quarter percentage point reduction. Resourceful Finance Pro expected at least a half-point cut due to lagging government data.

Some Fed members likely regret not implementing rate cuts sooner like the major European central banks did earlier this year. For one thing, Fed members knew — as does anyone who’s paid attention to the accuracy of government reports — that the job numbers didn’t add up. All of the modest job growth being reported by the feds keeps getting rounded down, months later.

So we can’t say we’re surprised that the Fed reduced the rate benchmark to a range between 4.75%-5%. What caught more people off guard? The Fed says it expects to make two more quarter percentage point reductions by the end of the year. Talk about making up for lost time!

The markets jumped as expected. Small businesses that need capital and held off borrowing at high rates are finally gaining a measure of relief. Refinancing of loans is on the agenda for many. And a lot of banks, in particular mid-sized and regional banks saddled with commercial real estate debt, will be happy to talk business.

Rate Cuts Signal the Job Market’s Shrinking

So now the cat’s out of the bag: We’re in recession territory. Hopefully this slowdown is a short one. Close to a million and a half full-time jobs got slashed in the past 10 months or so. Practically all new jobs being added to the economy are part-time and are going to foreigners who’ll work for lower wages.

The official jobless rate is 4.2%, but it doesn’t reflect the growing number of Americans who are working more than one job to keep their homes and standard of living. Instead of the Great Resignation, we’re into the Great Stay where a high percentage of employees are relieved to still be employed (and insured health-wise).

Employers may still be searching for talent in key areas. But businesses don’t need to worry as much about their B+ workers jumping ship in the next few months. It’s an employer’s market for the foreseeable future.