U.S. stocks rallied to pull the Dow industrials into positive territory for the week, after news service Interfax reported Russia had ended military exercises near the Ukraine. While much of the buying was short-term oriented traders such as hedge funds closing out defensive positions from earlier in the week, this was welcome news. The U.S. economy also showed signs of life with the second quarter gross domestic product (GDP) coming in at 4% and the July Institute of Supply Management (ISM) recording a three-year high of 57.1.
The strong second quarter economic growth has once again ignited the discussion over when the Fed will begin raising interest rates. For the Yellen Fed, it’s all about jobs and in particular full employment, which will be the key determinant for when the Fed begins its move. While the tumble in the U.S. unemployment rate from 7.3% to 6.2% has been impressive, there’s still much more to do on the employment front.
For starters, there’s still plenty of slack in the labor market with some seven and a half million Americans that are counted in the ranks of the employed because they have a part-time job, but are willing to work full-time if such a job were in the offing. Then there is the million and a half more Americans that are counted as if they are out of the labor market but would work if they could find a job.