Obviously everyone hopes that the unemployment problems in the U.S. will abate. But CD investors have special reason to hope that unemployment goes down. When unemployment goes down, CD rates should rise.
Rarely would there be such a strong correlation between employment trends and CD rates, but today it seems like these two really are tied together. The Federal Reserve has promised to keep interest rates low until the economy improves. CD rates generally follow interest rates offered by the federal government.
Banks have been given hundreds of billions of dollars, and many prominent U.S. companies are returning to strong profitability. But one area of the economy that has not yet improved is unemployment. So many Americans feel like the rich are getting back to being rich and the middle class are on the way to becoming poor.
The Fed is using a strategy of low interest rates to spur companies to borrow money so that new staff can be hired. It is distinctly unclear whether this strategy is working or will work in the long run. But the government must try to do something, right? For the moment, low interest rates for an “extended period” is a big part of that something.
Want higher CD rates? Hope for lower unemployment.
It appears, for now, that you cannot have one without the other…
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