Friday, March 10, 2006

That's a pretty good number 

That was my reaction when a friend at breakfast shoves his HP handheld in my face and shows me the February employment report. (I'm not sure why he did that -- being helpful? Wants to show me his handheld is faster than mine? I'm going with a 'compensation' theory myself.) It's pretty good. Even better than fair.
Nonfarm payroll employment grew by 243,000 in February, and the unemployment rate was little changed at 4.8 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job gains occurred in construction, financial activities, health care, and several other industries.

The unemployment rate was up a tenth because, though we had more jobs, the number of people entering the workforce rose by 335,000 in the month.

One area of a little concern will be the rise in wages, which for the 12 months to February rose 3.1%. While that hasn't translated to higher consumer prices generally just yet, it is something to keep an eye on. Kash noted yesterday that long-term rates have finally started higher, and maybe are signalling an early end to the inverted yield curve. But these results are adding pressure to the Fed to raise short-term rates too, though Reuters is reporting steadiness in interest rate futures markets right now. David Altig is also noting the pressures on the Fed from overseas, with Japan and the EU perhaps getting off the mat and demanding more capital at home. I'm already on board for a 5.25% Fed funds rate as being consistent with a Taylor rule-led monetary policy that targets 2% inflation. (Your refresher course.) 5% is almost already priced in the markets for May. Whether or not you think Bernanke needs to "buy credibility", that move fits current operating procedures from which I think he will not deviate.