Friday, March 10, 2017

Economists React to the February Jobs Report: ‘A March Hike Is a Done Deal’

From Real Time Economics:
U.S. employers added a seasonally adjusted 235,000 jobs and the unemployment rate ticked down to 4.7% in February, the Labor Department said on Friday. Underlying details on labor force participation and wages were relatively strong, likely adding to expectations the Federal Reserve will raise its benchmark interest rate at its policy meeting next week.
Here are initial reactions from economists and analysts:

“The U.S. labor market is running hot, tight and past full employment. The stage is set for a noticeably improved wage picture in 2017 and with the improvement in the underlying economic fundamentals, the Fed will almost surely hike rates by 25 basis points at its March 15 meeting. With the labor market this strong, the economy is not only capable of absorbing the 75 basis points that the Fed forecast implies, the hawks on the committee likely have gained the initiative, opening the way for another 25 basis points on top of that by the end of the year.” — Joseph Brusuelas, RSM US

“A March hike is a done deal. The report was the last piece in the puzzle and there is nothing here that will make the Fed want to step back from their recent signaling. The challenge for the Fed now is to ensure that the market doesn’t start extrapolating a much more rapid series of hikes. Investors are comfortable with three hikes this year but any suggestion of four will probably cause a wobble.” — Luke Bartholomew, Aberdeen Asset Management

It’s too early to tell if the pickup in job growth in early 2017 is due to the Trump administration. Given that few actual policies have changed, it could be that businesses are feeling more positive in the early days of the new administration; this might be one reason for the big jump in manufacturing jobs in February. But the underlying trends for the economy now are similar to those in 2016: more jobs and higher wages boosting consumer income and spending, and an improving housing market.” — Gus Faucher, PNC Financial Services

“Today’s strong jobs report comes as little surprise to many economists, with one of the warmest Februarys on record and an economy riding a wave of postelection optimism and a White House promising major tax cuts, an infrastructure spending boom and regulatory relief. With the economy 92 months into the current economic expansion—the third longest on record—it remains to be seen how long today’s pace of job growth can continue.— Andrew Chamberlain, Glassdoor

Overall, the headline job numbers in this report were stronger than we had expected; however, we see no reason to be overly optimistic in the detail. The modest rise in manufacturing employment points to stabilization in the sector, after a subdued performance for much of the past year. Service-sector employment remains soft relative to our expectation. On net, this report is solid but does not change our fundamental view of activity in the economy.”  — Rob Martin and Michael Gapen, Barclays