Economic Reports Scorecard
The Federal Reserve is widely expected to raise interest rates again at their meeting next week. They obviously view the recent cyclical upturn as being durable and the inflation data as pointing to the need for higher rates. Our market based indicators agree somewhat but nominal and real interest rates are still below their mid-December peaks so I don’t think a lot has changed. More interesting will be how the markets react after the Fed does what everyone expects it to do. I suspect we will soon be hearing – again – about the conundrum of long term interest rates.
The economic data in any case hasn’t really been all that strong. Yes, the first derivative does seem to have turned higher but the incline is still pretty gradual. The jobs report is a good example, where the monthly average has moved up since the election but is still well within the range we’ve seen this entire expansion. President Trump and his supporters have been quick to take credit – I’m pretty sure Joe Kernen fainted on CNBC when the number was announced Friday – but there may be less there than meets the eye. As many others pointed out, February was unusually warm – 7 degrees above average – which probably means there are some seasonal adjustment issues with the headline number. I seriously doubt the economy produced anywhere near 58,000 construction jobs last month.
The election may be having an impact too but probably not in the way the President thinks. It is quite possible – I think likely – that some hiring was put on hold in the run up to the election. With so many pundits talking about crashes and other disasters if candidate Trump somehow turned into President Trump, I can certainly see how that might make companies a little gun shy in their hiring. Or maybe the hiring slowdown we saw last year was concern about Mrs. Clinton getting elected. Take your pick but the point is made; election uncertainty probably had some impact on hiring last year. The last few months of better than expected hiring may well just be catch up. That is, of course, conjecture on my part but we’ll know the answer soon enough.
