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January 06, 2006
The Employment Report: On Average We're Just Right
I think it's fair to say we weren't expecting this one. From CNNMoney:
Hiring slumped in December though the economy created 2 million jobs for the second straight year, the government said Friday, in a reading that was mostly weaker than Wall Street had expected.
The economy created 108,000 jobs last month, compared with a revised gain of 305,000 jobs in November, the Labor Department reported. The December gain was the smallest of the year aside from September and October, when Hurricane Katrina slowed hiring.
Kash thinks the report is disappointing, but it's awfully hard to focus on that 108 number in isolation of the 305 number -- or to be very confident about what the next set of revisions will bring. In any event, the people in the MSM Rolodexes seem pretty clear about what it all means. Again, from CNNMoney:
... the revision to November job growth and the higher-than-expected wage growth could mean the Fed will raise rates at its meeting in March as well.
Anthony Chan, senior economist with JPMorgan Asset Management, said that he believes that overall the job report makes an end to rate hikes more likely.
"This report makes the Federal Reserve graceful exit from the policy arena a lot more palatable," he said. "It's difficult to argue that the Fed has much more heavy lifting left."
Analysts said the latest jobs data meant odds were rising that the Federal Reserve was near ending the rate-rise cycle it initiated in mid-2004. The U.S. central bank has raised the federal funds rate 13 times to 4.25 percent.
"The report is probably a shade on the weak side and it increases the chance that the Fed is more likely to stop raising rates at 4.75 percent at the middle of the year, rather than going higher," said Cary Leahey, senior managing director at Decision Economics in New York.
"These figures suggest that growth is stable but not extremely strong," said Nigel Gault, head of US research at Global Insight, a consultancy. "These figures should add to the conviction in financial markets that the Fed will soon be able to stop raising rates. "
So, the Fed will be impressed enough to put an end to rate hikes due to "the revision to November job growth", or because the report was "a shade on the weak side", or because job "growth is stable but not extremely strong." Sounds like a consensus.
UPDATE: Barry Ritholtz agrees with Kash: "Labor Markets Continue to Underperform." General Glut calls US job growth "amazingly weak." pgl still frets that the employment-population seems stuck in the mud. Mark Thoma concurs that the labor market is "not as robust as would be expected in a recovery." But Calculated Risk suggests that growth for 2005 "seems solid." And The Skeptical Speculator has this, from Reuters: "Overall, the employment figures imply a relatively strong hiring outlook."
Tim Duy breaks down what it all might mean for monetary policy. Michael Mandel maintains his lonely focus on wages in the tech sector, and likes what he sees.
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