Friday Five: Job Growth and Inflation in 2016

Jobs Report
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Google “jobs report 2015” and according to the reporting, every Jobs Friday in 2015 was as much about the rumoured rate hike from the Fed as it was about the jobs themselves. Each month since coming to write for B4J, I combed through the Jobs Friday responses, searching for deep analysis of the employment data and screening out market speculation. It’s Jobs Friday, I would complain, can we talk about… the jobs? Of course I recognize the role of market trends in hiring, but that laser-focus on market reaction diverted a lot attention from the employment trends towards stock trends.

Well, now that the Fed has actually increased key interest rates and major banks have responded by beginning to raise theirs, now we can talk about the impact of the Fed hike. It’s ok, you have my permission.

It is too early to say whether the Fed made a mistake by raising rates in December

You may have my permission to speculate but H.C of the Economist doesn’t seem to keen on settling the matter of rate hikes yet. The hike has already had an impact on markets, and while the news this morning doesn’t seem too sunny – markets in turmoil, a happy ending not yet in sight – it’s too soon, they say, to gauge long term impact.

The questionable logic behind the Fed’s premature rate rise

On the other hand, R.A., also writing in the Economist, argues that the rate hike was a mistake and everything’s going to hell in a hand basket. In addition to the rate hike sparking a period of market instability – which, I’d argue, is exactly what we all should have expected, it being the first hike in years – R.A. is concerned about “an inflationary spiral between wages and prices, pushed ahead by rising inflation expectations.” R.A. worries that wage growth, which you may remember I’m not exactly bullish about, could spur inflation. Thankfully, H.C. has already rebutted him for me.

December’s Strong Jobs Report, and More

Over at WSJ, analysts are concerned about wage growth and the Fed’s feelings about wage growth. The key question is this: will the Fed hike rates again at the end of January and/or the end of March? For reasons I’ll let you discover by listening to their discussion, they think that no, the Fed will probably not be raising interest rates again.

A Deep Dive Into Friday’s Jobs Report

Over at The Street, Jeremy Lakosh breaks out the charts and mulls over the jobs report in full. His welcome analysis focuses on comparing job growth to labour force participation, and employment rate vs time unemployed. His predictions for 2016 are inflation and full employment.

Here’s Some Bad News From the Very Good Jobs Report

But wait! Maybe Jeremy is 100% wrong. Stephen Gandel, writing in Fortune, points out that 2015’s job growth was actually slower than 2014’s. He’s concerned that “the economy is indeed slowing, and it’s not just that hiring has maxed out.” What’s his reasoning? Although boomers are retiring and the working age population is growing, job growth is slowing, not speeding – that is, that nicely low unemployment rate of 5%, which we’ve held steady at for several years now, may soon be rising.



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