Jobs Report Today Adds To Fed Puzzle

Last week the Federal Reserve signaled a huge policy change–no (or at most one) interest rate increase in 2019 and flexibility on continuing/ending the $50 billion a month program to reduce the size of the Fed’s balance sheet.

Markets cheered the shift on interest rate increase for 2019, but worried about what might be behind the Fed’s move. Had the U.S.central bank seen something in the data that raised fears of a looming recession?

Well, there sure wasn’t anything in the January jobs numbers released today to signal a recession, looming or otherwise.

Nonfarm payrolls increased by 304,000, the most in almost a year. The January gain came after the Labor Department revised the December job increase down to 222,000. Economists surveyed by Bloomberg had projected an increase of 165,000 jobs.

Average hourly earnings rose just 0.1%Q from December. That’s the smallest month to month gin since late 2017. It brought the annual gain in wages to 3.2%. Which matched economists’ expectations but represented a slight drop from the revised 3.3% annual gain in December.

Nothing in those wage growth rates to argue that the Fed should have thrown out all its concern about the possibility of wage inflation in a job market that is running full out.

The reassurance on recession has helped push stocks up modestly this morning. As of 11:20 a.m. New York time the Standard & Poor’s 500 was up 0.22% and the Dow Jones Industrial Average was higher by 0.51%. The NASDAQ Composite was unchanged and the small cap Russell 2000 index was lower by 0.1%.

Weighing on the market was last night’s earnings report from Amazon (AMZNWealth Strength IndexAMZN is Moderately Flat and trending Up). The company reported record profits but lowered guidance for 2019. The stock was down 4.04% as of 11:20 this morning.