on August 22 2014 4:15 PM
The article states: “Capital Economics’ senior U.S. economist Paul Dales said Yellen clearly remains more concerned about the threat of killing off a labor market rebound than about prices rising too fast. “Despite the faster-than-expected decline in the unemployment rate, Yellen does not appear to have changed her view that there is still ‘significant’ slack in the labor market,” he said on Friday.
Dales disagrees with the Yellen view of the labor market; he suggested that anecdotal data shows a more robust job market than Yellen sees. “The increasing proportion of firms saying that jobs are hard to fill and the growing share of households saying they are plentiful suggests that labor market slack is dwindling. Yes, wage growth has yet to pick up. But the surveys suggest that could happen later this year.”
Dales suggested that if wages do begin to catch up more quickly with job growth in coming months, the Fed will have to rush to raise rates.
Raising rates too quickly could backfire, weakening the job market as money to expand and create jobs becomes more expensive.
“In fact,” Dales said, “if the Fed waits until wage and price inflation rise significantly, it could find itself behind the curve, meaning that rates would have to rise further and faster than would otherwise have been the case.”
Others expressed concern that Yellen’s discussion of rising wages may indicate an earlier-than-expected rate hike. “Personally I’m a little concerned about that,” said Mark Mascia, president and CEO of New York-based real estate investment firm Mascia Development.
Firms like Mascia’s are particularly sensitive to rising rates. Real estate firms also play an important part in job growth as the economy improves, by providing work as firms expand and build new facilities and family balance sheets improve and spur residential market growth.”
What the article did not say is that Mascia Development knows its diversified market approach and continual focus on value investing in secondary and tertiary markets will insulate the firm and its investors better than many other real estate firms. Furthermore Mascia Development has focused on attaining long term fixed rate debt with leases that pick up the cost of inflation to further protect from rising interest rates and rising costs of inflation. Both of which will be coming.
Please check out the link below for the full article that Greg wrote, it is a good overview of where we are now with rates.