Fed Still Likely To Take Gradual Approach After Strong Jobs Data
The February employment report, released by the Labor Department this morning, was broadly strong, showing the economy added 295,000 jobs in February, helping to push the unemployment rate down to 5.5 percent. Other broader measures of unemployment rates fell as well. However, the participation rate also ticked down in February.
Wages did rise in February but the gains are still modest, rising 2.0 percent over the past twelve months.
The combination of jobs gains and higher wages pushed the aggregate weekly payrolls index, a proxy for take-home wages, up 0.3 percent for the month and 5.4 percent over the year. When viewed in combination with rising household wealth and improving consumer confidence, we expect ongoing gains in consumer spending.
We expect the Fed to continue to tilt to a gradual approach when removing support for economic growth, delaying the first rate hike as long as possible and then, raising rates at a gradual pace.
The combination of solid growth for the economy, low but steady inflation, and supportive monetary policy suggests a favorable outlook for bond and stock markets.
Robert Hughes
Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
