Fed fears soothed by middling jobs report, flat wages
What the hawks believed:
Wage inflation is closer than believed because most of the people who have left the workforce aren’t coming back.
What Yellen and the doves believed:
The improving jobs picture will bring more people back into the labor force and restrain wage inflation.
What happened today:
The participation rate rose and wage inflation was flat, which is evidence that Yellen was right.
What it means:
Before the report, the Fed gave a nod to the inflation hawks in the FOMC statement by saying ” Inflation has moved somewhat closer to the Committee’s longer-run objective.” That sparked fears about higher interest rates because of inflation and added a special focus on avg hourly earnings in the payrolls report. But earnings (and hours) were flat.
Ultimately the US dollar is still a good place to be because the Fed will raise interest rates before others. I think a lot of people are asking the wrong question; rather than worrying about inflation, they should be asking if the Fed should move rates up to 1.00% to counteract some risks in the financial system.
Yellen’s going to pull a Cheney and shoot Plosser right in the face
