I have post in earlier article, Time lag and Intervention talked about how long time lag is needed in order to make intervention (cut interest rate) work.

As we see, time lag maybe runs in short time or long run; while time lag work, what the impact or reaction when time lag is working. Reuters to day, send us the good report (actually bad report to American employee) because the impact from interest rate intervention by FED doesn’t work till now.

According to Reuters, The Labor Department on Friday said non-farm employment fell by 80,000 jobs in March, the biggest decline in five years. Financial markets saw the drop as reinforcing the need for further Federal Reserve interest rate cuts.

This is just the beginning; FED expectation on their interest rate cut doesn’t work well. Time lag make unemployment rise. The report is bad news but it’s real.

Economic Theory teach as that lower interest rate makes investment arise, more job available and more employees will be hired, but it doesn’t. The unemployment rate jumped to 5.1 percent from 4.8 percent, the highest since September 2005. Another word, There are 80.000 employees became unemployment now.

FED confess this problems, try to handle the phenomena and launch a new statement, perhaps that their intervention on interest rate will runs well in near soon. Expectation goes wrong. Increasing in total unemployment on March makes White House unhappy based on the Job Report from Labor Department.

By the way, Cutting interest rate, could make bad reaction or good reaction in time lag.