Financial and Economic Brief - Mar. 7, 2017by © Liberty Publishing, Inc.
Job Claims Dropping
According to the Labor Department, initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended February 25. This is the lowest level since 1973, pointing to further 'tightening' in the labor market. Claims numbers below 300,000 are associated with a healthy labor market. The labor market is at or close to full employment, with the unemployment rate at 4.8%. Labor market 'tightness', mixed with rising inflation, could encourage the Federal Reserve to raise interest rates at its March policy meeting.
Interest Rates Expected to Rise
Federal Reserve Chair Janet Yellen signaled last week that if the economy 'stays on track for the next few weeks', a rate hike would likely come at the March 14-15 Fed meeting. The Fed last raised rates in December, the second time in almost 10 years. A rate increase would be another sign that the U.S. economy is closer to full health after a very slow recovery from the recession in 2008. Yellen also indicated that if the economy 'picks up more momentum', the Fed may need to raise rates at a faster pace.
GM to Sell Opel and Vauxhall to PSA
General Motors (GM) will sell its European operations to France's PSA Groupe, a deal valued at $2.2 billion. PSA will be buying GM's Vauxhall and Opel brands. 'For GM, this represents another major step in the ongoing work that is driving our improved performance and accelerating our momentum,' said GM CEO Mary Barra. The deal also relieves GM of problems when it comes to the profitability of its European operations. GM will be taking a charge of $4 to $4.5 billion, primarily in cash, with the transaction. Subject to regulatory approvals, the transaction is expected to close by the end of 2017.