- The end of the port strike is another piece of very good news
- The Fed does not want to react too much to one data point
- If we get more jobs reports like this, we will be more confident we are settling at full employment
- Strong jobs report is likely to mean strong GDP
- We are still a ways off from having to sort out where neutral rate is
- We have time and runway to figure out where the settling point on the Fed policy rate is
- We need to try to maintain conditions like they are now
- It’s hard to say where the neutral rate is but it’s definitely higher than zero
- The bulk of FOMC participants see it in the 2.5-3.5% range. We’re still a ways off from having to sort that out
- Contacts mostly say ‘steady as she goes’ not a re-acceleration and not a drop-off
- If productivity keeps booming, that implies higher growth, higher neutral rate but only because the economy can handle it
- A broad set of data shows the labor market is cooling
- The problem with a soft landing analogy is that it implies stopping; the economy keeps going
- If we could keep unemployment at 4% to 4.5% with inflation around 2%, that’s exactly what the Fed wants, everyone should be happy
He’s happy with the jobs report but certainly not indicating the Fed doesn’t need to cut rates.
This article was written by Adam Button at www.forexlive.com. Source