- The end of the port strike is another good news
- The Fed doesn’t want to interact too much with a single data point
- If we get more jobs reports like this, we will be more confident that we are stabilizing at full employment
- A strong jobs report likely means strong GDP
- We are still a long way from having to decide where the neutral rate will be
- We have time and runway to see where the stability point on the federal funds rate will be
- We need to try to keep conditions as they are now
- It is difficult to determine where the neutral rate is but it is definitely above zero
- The bulk of FOMC participants see the range as 2.5-3.5%. We’re still a long way from having to solve that
- The contacts mostly say “steady as they go” and not re-acceleration or deceleration
- If productivity continues to boom, it implies higher growth and a higher neutral rate, but only because the economy can handle it.
- A wide range of data shows that the job market is slowing
- The problem with the soft landing analogy is that it implies stopping; The economy continues
- If we can keep unemployment at 4% to 4.5% with inflation around 2%, that’s exactly what the Fed wants, and everyone should be happy.
He’s happy with the jobs report but it certainly doesn’t indicate the Fed doesn’t need to cut interest rates.
This article was written by Adam Paton at www.forexlive.com.