The economic recovery seems to depend on jobs. The report out last Friday was disappointing. The Labor Department reported that the private sector added just 71,000 jobs in July, fewer than the 90,000 expected.
The Federal Reserve could take steps to stimulate the faltering economy. What are the options?
During the financial crisis, the Fed pushed down short-term interest rates to near zero, and then took the extraordinary step of purchasing $1.7 trillion in mortgage securities and Treasuries. That further drove down mortgage rates a half point and helped stimulate the housing market.
What will the Fed do now? Economists say the Fed is likely to reinvest the proceeds from maturing mortgage securities in new mortgage or Treasury assets. This would spread the benefits beyond the housing sector and Treasury bonds would be easier to sell. Only about $160 billion in mortgage assets are maturing each year, so the effect on interest rates would be minuscule. This would reassure jittery financial markets that like to see action.
Hopefully whatever the Fed decides to do, helps to stimulate the economy. More jobs help everyone. Without jobs, no one will buy houses.