Messy Jobs Report Still Not Considered Bad Signal | RJO Futures

April 7, 2017 9:26AM CDT

The weaker-than-expected headline from the March jobs report will not deter the Federal Reserve from raising short-term interest rates twice more this year, economists said.  The March data won't knock them off course, even though the U.S. created just 98,000 new jobs in March. 
Even though job growth slumped in March, many economists say the data is not a signal that the U.S. economy is falling out of bed. I'd be really surprised if the Fed takes this as a signal that something bad is going on. For one thing, it would be unusual for the labor market to get substantially worse without first seeing hints in the weekly jobless claims data, which have been very strong lately. Another good sign is the unemployment rate fell to 4.5% from 4.7%, the lowest rate since May 2007. A 4.5% unemployment rate is at the bottom of most estimates of where most economists think the jobless rate could sit without generating inflation. The Fed has clearly been successful in bringing unemployment down to full employment. It will encourage the central bank to modestly increase short-term rates. The central bank will now turn its attention to inflation data. The pace of rate hikes will depend on if there is any acceleration in prices. My forecast is for the next hike in June. Prior to the report, Minneapolis Fed President Neel Kashkari said he would be watching the March unemployment rate closely. A further drop in the unemployment rate might change his mind about the central bank holding off on raising interest rates, he said in an interview with Bloomberg TV. Kashkari was the lone dissent against the rate hike last month.

 

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