We’d all love to see prices on goods and services decline, but tight monetary policy is a balancing act: Higher interest rates also make it more expensive to borrow money for big-ticket items and to carry credit card debt. And let’s not forget that the higher interest rates go, the more likely that the U.S. could tip into a recession. On Friday, the Labor Department’s August jobs report could strengthen or weaken the Fed’s case that the economy is strong enough to handle higher rates: If more jobs were added than expected (and the numbers were as good as July), then that means that employers are continuing to hire workers. The more people are employed, the more we’ll have money to pay our bills and buy things, and that helps keep the economy going. But labor market weakness could indicate that layoffs are coming and that a recession might be here sooner than we’d like. We’ll get a snapshot of the housing market tomorrow when the Case-Shiller Housing Index is released, revealing if home prices have fallen—and by how much. We’ll also hear from several policymakers at the Federal Reserve throughout the week, and you can be sure that investors will be paying close attention to their remarks. That could make this week a bumpy one in the markets, so don’t be too alarmed if there’s a lot of volatility.
