Bill Cheney
Bill Cheney
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With today's report, the odds of a negative quarter of GDP growth have increased substantially, and the chances of a full-fledged recession just went up -- perhaps approaching 50-50. Job losses cut directly into the spending of the newly unemployed, and indirectly tend to have a very real impact on the confidence of those who are still working. If demand falls, firms will lay off more employees, and the downward spiral could put us over the edge into a bona fide recession before the Fed's actions can take effect.
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The unemployment situation won't truly improve until businesses increase hiring a lot more than they did in February. It takes roughly 150,000 new jobs per month just to keep the unemployment rate steady, as population growth increases the work force.
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The moment they think there are jobs there, they'll be out looking and the employment rate will start heading up again. I think that's on the whole a good sign at this point in the cycle.
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I'd say there's only a 25 percent chance of a rate hike in June even. Even with another strong jobs report Friday, they'll want to have something that looks more definitely like a trend.
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People are now looking for jobs because it is now worth looking.
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It takes something on the order of 150,000 new jobs a month to absorb the natural increase in the labor force. As long as we keep getting smaller positive numbers than that, the unemployment rate should be trending up rather than down.
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Rising unemployment, ironically, contains good news. It signals people who had given up and dropped out of the work force are back looking for jobs. Clearly, they have hope there are jobs to be found.
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I don't think it really suggests there is any inflation developing -- a 0.3 percent rise in wages is pretty manageable. But it's a pretty positive report; it suggests that the overall jobs market is pretty healthy.
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This is a perfect jobs report. Job growth slowed significantly and there are absolutely no signs of inflation. Greenspan may be pulling off what once seemed impossible: two soft landings in one economic expansion.
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Santa's workshop will be operating pretty much at full capacity. There just probably won't be much elf overtime.
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If unemployment sticks at about 6.0 percent and starts coming down, the Fed will probably feel it has to start tightening fairly soon.
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Inflation is a potential risk. It's not a reality yet.
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It's another in the long series of the no-news-is-good-news story about inflation.
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I think we're toward the end of a period of real weakness and, by the third quarter, all the money (Fed Chairman Alan) Greenspan and the Fed have been pumping out will start to be spent.