Will the Fed Increase Rates Next Week?

The numbers are in and it looks like the world financial situation is not affecting our economy's job creation. This gives the Federal Reserve Board food for thought going into their meeting next week. As we indicated earlier, many analysts originally thought this would be the month the Fed raised rates again, but market volatility and international concerns tempered these thoughts.

The economic news leading up to the jobs report was pretty solid as well. There was an upward adjustment in the measure of the fourth quarter's economic growth and solid growth in orders for durable goods, existing home sales, personal income and consumer spending. Not all the news was positive, as new home sales faltered, but new home sales were coming off a month in which we saw a very large increase in sales.

All in all, the increase in jobs of 240,000 shows that the economy is continuing to move forward, which means that we are moving towards another rate increase by the Fed. Looking at the big picture, the stock market's recent rally and the rebound in oil prices are all giving us the same indication. However, that does not mean that the Fed will definitely be increasing rates when they meet next week, especially considering the fact that the increase in wage growth was tame. But certainly, it puts such an increase back on the table.

Mike Ervin
NMLS # 282715
W.J. Bradley Mortgage
mike@mikeervin.com
www.mikeervin.com
P: (650) 451-7797
C: (650) 766-8500

Another Important Jobs Report

Every month watching the release of the employment data is interesting. However, with the Federal Reserve Meeting coming up in just a few weeks, the jobs report will take on a special meaning. It has been a tumultuous start to the year with stocks, oil prices and interest rates moving lower in tandem. Before the year started, many were predicting the first rate increase of the year by the Fed at the March meeting. Now most analysts have changed their tune in this regard.

We should not assume that the Fed has changed their mind. We have already seen stocks trying to rally and a pick-up in consumer inflation for the first time in a while. Add a strong jobs report to the mix, and the speculation about the Fed will start up again. That does not necessarily mean that the Fed will raise rates in March, but even a strong statement about the health of the economy might be enough to affect the markets.

One thing is for sure -- the markets are always changing and the changes can come quite rapidly. Thus, we should not take it for granted that stocks are going to have a down year and interest rates are going to hover at record lows all year. This means the markets will be watching the jobs report closely for any evidence that the economy is still producing enough jobs per month in order to put upward pressure on wages.

Mike Ervin
NMLS # 282715
W.J. Bradley Mortgage
mike@mikeervin.com
www.mikeervin.com
P: (650) 451-7797
C: (650) 766-8500