Jobs Report Easily Beats Expectations: Unemployment Down, Wages and Participation Up

Expectations are almost unanimous for a rate hike which could be bad news for stocks as the stock market typically tends to fall after the third in a series of rate hikes, with the average being around 2%.

February saw another 235,000 jobs created, easily topping Wall Street forecasts and hardening expectations for a third increase in short-term interest rates this week.

“We’re getting closer and closer to full employment”, Ryan Sweet, an economist at Moody’s Analytics, told Bloomberg.

What do you think of the reasons why the Fed is likely to increase interest rates?

The latest United States jobs report removes any lingering doubts about whether the Federal Reserve will raise interest rates next week.

This level of probability was “about as inevitable as it gets”, said Kathleen Brooks, research director at City Index. At this point, they see that the labor market has on aggregate returned to normal, and therefore interest rates should be normalized to match.

Canada’s economy added another 15,000 jobs in February, pushing the unemployment rate down to 6.6 per cent.

The so-called “dot plot”, which displays individual rate forecasts of officials on the policy-setting Federal Open Market Committee, will probably continue to show three hikes this year as appropriate, according to the median estimate.

As has been reported in large part related to theoutcome of the USA presidential election, we know the job market has distributional issues, with some regions and sectors thriving while others struggle.

For the Federal Reserve, one of the key issues is that the continued jobs growth is likely in time to contribute to higher wages and price rises.

Friday’s figures reinforce that expectation. During those years, any slight shift in sentiment about when the Fed might begin raising rates – a step that would lead eventually to higher loan rates for consumers and businesses – was enough to move global markets.

Friday’s jobs report is the last major piece of economic data before the Fed’s scheduled policy meeting Tuesday and Wednesday.

The February numbers are the first to reflect the economy’s performance under Donald Trump’s administration.

By contrast, the number of people who said they could not work in February over the prior five years averaged 314,000 (which included two very cold starts to the year in 2014 and 2015 when the economy contracted).

The U.S. market needs to add 100,000 jobs a month to keep up with growth in the population.

All up it’s been more than a decade since the previous tightening cycle in USA interest rates, which lasted from June 2004 to June 2006, and shares overall did well during that time rising by about 15 per cent. In his first few weeks in the White House, Mr Trump painted a dire picture of economic stagnation and industrial decline, using some of the bleakest language ever used by a U.S. president.