Almost one quarter of the year is finished, and we still do not have an answer. By now we were supposed to be experiencing the start of a “mild” recession. Yet interest rates have risen since early February because the economy is too hot, threatening our progress on the war against inflation. Kind of confusing to understand where the economy is heading, but we would be surprised that it would not slow down if rates continue to stay elevated.
The Federal Reserve meets next week, and we will get a gander as to what they think a week from tomorrow, when their decision is released. Before the January jobs report was released, the markets were betting on another .25% increase in short-term rates and some analysts were predicting that this would be the last increase for some time. And some were predicting the Fed would be lowering rates by the end of the year. After that report, some were predicting that a .50% hike is on the table and that a few more increases are on the horizon. Just more reasons for the focus on the February jobs numbers.
Did the report bring us back closer to the expected mean? Not really. The increase of just over 300,000 jobs last month was an indication that the jobs market remains strong. Plus, last month’s data was not adjusted down significantly. The unemployment rate rose to 3.6% from 3.4%, indicating more workers have reentered the workforce, another good sign. Finally, the all-important wage growth came in slightly better than expected. Today we have the release of the consumer price index and the wholesale inflation index will also be released this week. All in all, plenty of fodder for the Fed to chew on. Hopefully they won’t swallow too hard!