Just days after Fed whisperer Goldman Sachs made its first (of many) revisions to its Fed rate hike schedule, and no longer expects a March rate hike (if still somehow seeing 3 rate hikes in 2016), moments ago Fed mouthpiece Jon Hilsenrath reiterated the Fed’s latest favorite catchphrase – that would be “watchfully waiting” for those who haven’t paid attention – , and said that today’s jobs report leave the Fed in limbo when it comes to the March rate hike decision. More importantly perhaps he adds that “Fed officials were expecting a slowdown.” However, when one adds the 105,000 in prior month revisions, was is this big?
As he writes in the WSJ, “Friday’s jobs report likely leaves Federal Reserve officials in a ” watchful waiting” mode as they consider whether to lift short-term interest rates at their next policy meeting in March.”
The reported increase of 151,000 jobs in January was a bit less than Wall Street analysts expected, but still enough to absorb new entrants into the labor force and reduce economic slack. Fed Chairwoman Janet Yellen, in testimony to the Joint Economic Committee of Congress in December, said the economy needed to produce fewer than 100,000 jobs a month to absorb new entrants into the labor force and stabilize unemployment. Fed officials were expecting a slowdown. Payroll gains averaged 279,000 a month in the fourth quarter, too much for an economy that was barely growing.
Loretta Mester, president of the Federal Reserve Bank of Cleveland, said Thursday, “I wouldn’t be surprised if the pace of job gains slowed somewhat, but the gains should be strong enough to put additional downward pressure on the unemployment rate.”
Meantime, the jobless rate decline by 0.1 percentage point to 4.9%, its lowest level since February 2008, reinforces the central theme behind the Fed’s December rate increase–slack in the job market is diminishing and will eventually lead to more wage and inflation pressure.
A 12-cent increase in average hourly earnings, which lifted wages by 2.5% from a year earlier, underscores that theme. The 2.5% increase is small by historical standards, but shows signs of lifting.
Fed officials will be wary of moving in March after the market turbulence of recent weeks. Economic growth was slow in the fourth quarter and appears to be off to a slow start in the first. Officials will want to look at more data in coming weeks to assess whether a slowdown is taking place or, instead, if the trend of 2% annual economic growth remains intact.
The market is betting against a Fed interest-rate increase in March. Still, if officials see new signs of firming inflation or wages before then, or another drop in the unemployment rate in the February jobs report (to be released in early March), or signs of a growth pickup, they might proceed with a rate raise.
Hilsy’t bottom line? “It is likely to be a last-minute decision either way, keeping investors guessing along the way.”
Of course it is, and it will entirely depend on not only China and Crude, but the Dow Jones, which in turn will depend on what the very, very confused Fed will say over the next month and a half.
Welcome to reflexivity hell, Janet.
via Zero Hedge http://ift.tt/1TIMsFB Tyler Durden