Back on February 7th, I predicted in a blog post (The False Fundamentals Narrative Begins to Envelop the West) that if fundamental data was shown as continuing to rise in the US, the Federal Reserve would raise interest rates in March. At the time the chances of a hike were rated at virtually none by all leading mainstream economists.
Over 4 weeks later, and with the fundamentals all showing as strong, the widespread expectation has now shifted to the fed increasing rates (latest odds are 93% in favour). The latest jobs report released today has further cemented that feeling.
- Nonfarm payrolls increased by 235,000 in February and the unemployment rate was 4.7 percent in the first full month of President Donald Trump’s term, the Bureau of Labor Statistics reported Friday.
- Average hourly earnings increased by a healthy 2.8 percent on an annualized basis.
- The total of employed Americans surged by 447,000 to 152.5 million, the highest ever.
- The closely watched labor force participation rate edged higher to 63 percent, its best showing since March 2016. A broader view of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons dropped to 9.2 percent, its lowest level since April 2008.
- Those counted as not in the labor force declined by 176,000 to 94.2 million. The civilian labor force grew by 340,000 to just over 160 million.
- The solid February jobs report clears the way for the Federal Reserve to raise interest rates at its meeting next week, economists said Friday.
- “This should give the Fed the last bit of confidence needed to raise rates at the March 14-15 FOMC meeting,” said Thomas Simons, senior money market economist at Jefferies.
- Robert Brusca, chief economist at FAO Economics agreed. “They’re going. It’s pretty clear.”
- Brian Bethune, an economics professor at Tufts University, said the data shows the economy in a “sweet spot” with no hints that inflation is picking up so rapidly it would force the Fed to ramp up the pace of its plan for gradual rate hikes.
- Companies added jobs at a blistering pace in February, with a notable shift away from the service-sector positions that have dominated hiring for years, according to a report Wednesday.
- Employment in the private sector surged by 298,000 for the month, with goods producers adding 106,000, ADP and Moody’s Analytics said. Construction jobs swelled by 66,000 and manufacturing added 32,000.
- The total shattered market expectations of 190,000, according to economists surveyed by ADP. The blockbuster report also solidified market expectations for the Fed to hike interest rates next week.