The Fed Is on the Verge of Making a Major Policy Error
March 20, 2018 in Blogs
By Marshall Auerback, AlterNet

We recently learned that “Total nonfarm payroll employment increased by 313,000 in February” in the U.S., according to the Bureau of Labor Statistics—which, when combined with the ostensibly big fiscal policy stimulus introduced in February, would seem to justify the Federal Reserve’s increasingly hawkish outlook on interest rate rises.
The Fed, newly led by Jerome Powell, looks set to hike rates as early as this Wednesday. Yet there is a lingering sense that the current strength in the U.S. economy is more apparent than real. The employment data is not as strong as it looks on the surface, nor is fiscal policy as stimulatory as has been commonly assumed. Hence, the country’s monetary authorities might well be on the way to making a serious policy error that could abort the economy’s momentum, just as some of the non-1% are finally beginning to experience tangible gains from the recovery.
Let’s break these points down in a bit more detail. First, last month’s “blow-out” employment number: On the face of it, the employment situation report is anomalous. We saw a huge jump in goods producing (100K), mostly construction (+61K). But in the service jobs sector, 124K of the 187K of jobs created were in low-wage/low-hours sectors (retail, admin/waste, leisure, and health care). That would largely help to explain why, in spite of such an ostensibly large gain in the nonfarm payrolls, wage gains remained virtually unchanged, with hourly earnings actually coming in below expectations (in other words, a surprisingly tepid number relative to the overall growth in jobs in February). And even as we are adding higher-wage construction and manufacturing jobs, the overall constellation of the data implies a continuation of change …read more
Source: ALTERNET
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