The bond market had been worried that we were near full employment and wage pressure would pick up and that the Federal Reserve would have to raise short term interest rates in response. But now that the all important employment cost index was up just 0.6 percent, the Fed doesn't need to raise short term rates because the economy is slowing down.
More Quotes from Maury Harris:
The contained job gains will make it easier for the Fed to convince investors that it will not rush to tighten. We still expect tightening to start only next August.Maury Harris
You typically see a rebound in the labor force when the economy starts to recover. But because businesses are operating so much more efficiently, there's a limit to the number of jobs available. Unemployment could still go up a few ticks.
Maury Harris
This puts upside risks in our forecast for 4.5-percent annualized fourth-quarter growth.
Maury Harris
Difficulties of seasonally adjusting the retail sector around year-end suggest that the two-month average -- about flat -- is a more reliable gauge of hiring trends.
Maury Harris
Both current conditions and expectations remain above their wartime lows, but the reversal of previous gains undercuts the notion that the slowdown early this year owed only to geopolitical concerns. Consumers are clearly troubled by the absence of new hiring, and worry about income prospects.
Maury Harris
In crafting today's FOMC statement, we believe Fed officials were undoubtedly influenced by the perception that mixed signals from the Fed, and possibly some loss of credibility, accounted for some of the recent surge in bond yields.
Maury Harris
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