{"id":32801,"date":"2015-04-07T14:00:44","date_gmt":"2015-04-07T18:00:44","guid":{"rendered":"http:\/\/www.ino.com\/blog\/?p=32801"},"modified":"2015-04-06T16:23:37","modified_gmt":"2015-04-06T20:23:37","slug":"jobs-report-says-no-rate-increase-this-year","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2015\/04\/jobs-report-says-no-rate-increase-this-year\/","title":{"rendered":"Jobs Report Says No Rate Increase This Year"},"content":{"rendered":"<p style=\"margin: 0 0;\"><img loading=\"lazy\" decoding=\"async\" src=\"\/\/www.ino.com\/blog\/wp-content\/uploads\/2014\/12\/GeorgeYacik_Contributor_ImageBadge350.png\" alt=\"George Yacik - INO.com Contributor - Fed &amp; Interest Rates\" width=\"350\" height=\"131\" class=\"alignleft size-full wp-image-30496\" style=\"padding-top: 10px;\" srcset=\"https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2014\/12\/GeorgeYacik_Contributor_ImageBadge350.png 350w, https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2014\/12\/GeorgeYacik_Contributor_ImageBadge350-300x112.png 300w, https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2014\/12\/GeorgeYacik_Contributor_ImageBadge350-270x100.png 270w\" sizes=\"(max-width: 350px) 100vw, 350px\" \/><\/p>\n<p style=\"margin: 0 0;\"><br style=\"clear:both;\"><\/p>\n<p>Friday\u2019s jobs report was the final nail in the coffin for an interest rate increase in 2015.<\/p>\n<p>I know I shouldn\u2019t get carried away by one statistic, especially this early into the year. The nonfarm payrolls report is only one number \u2013 an important number, for sure, but still only one number \u2013 so one shouldn\u2019t base his entire opinion on it. And I\u2019m not. But the lackluster figure was just the latest evidence of just how weak the U.S. economy has gotten over the last several months and merely confirms the trend \u2013 with an exclamation point.<\/p>\n<p>The Labor Department said nonfarm payrolls grew by only 126,000 in March, the smallest gain since December 2013. To add insult to injury, February\u2019s increase was revised downward by more than 30,000 to 264,000. That brought down the average monthly gain in the first <!--more-->quarter to 197,000, down from 324,000 in the fourth quarter of 2014. <\/p>\n<p>The bond market\u2019s initial reaction to the report indicates that investors believe the Fed will be reluctant to begin \u201cnormalizing\u201d monetary policy \u2013 i.e., raising short-term interest rates off near zero \u2013 in the immediate future, possibly not before late 2015 or into next year. After the jobs report came out, bond prices jumped, sending the yield on the benchmark 10-year note down 10 bps or so to 1.82%, its lowest level in two months. <\/p>\n<p>The jobs report, while certainly weaker than expected, didn\u2019t come completely out of nowhere. The ADP national employment report that came out two days earlier proved to be a lead-in for the official government report. ADP said private-sector payrolls increased by only 189,000 in March, about 40,000 below expectations and down 25,000 from the prior month. <\/p>\n<p>Why are employers suddenly cutting back on hiring after the recent spate of adding more employees? Because economic growth isn\u2019t sufficient to convince them to keep hiring, or at least they want to see more evidence of sustained growth before they make the investment in more workers.<\/p>\n<p>While the March payrolls number undershot the Street forecast by about half, it really shouldn\u2019t have come as that big a surprise \u2013 a shock, maybe, but not a surprise. In fact, the U.S. economy has been growing feebly since late last year. Harsh winter weather in February and March may have made things worse recently, but we can\u2019t blame this one on the weather like we did a year ago. Nor can we blame it on a weak dollar and lower oil prices.<\/p>\n<p>The Commerce Department\u2019s final revision of Q4 2014 GDP showed annualized growth of 2.2%. That\u2019s down from Q3\u2019s 2.7% rate and the lowest rate in a year. The report also showed Q4 corporate profits falling at a 3% pace from the prior quarter, the largest quarterly drop in four years; on a year-over-year basis, profits rose only 2.9%, down from the prior quarter\u2019s 5.1% rate. Can we blame what happened in November and December on bad weather in February and March?<\/p>\n<p>That weakness has carried over into the first quarter of this year. The Chicago Fed\u2019s national activity index was in negative territory the first two months of this year. The ISM\u2019s manufacturing index fell to 51.5 in March, its fifth straight decline and the slowest pace in nearly two years. The important new orders component fell to 51.8, its lowest reading since April 2013.<br \/>\nConstruction spending is down two months in a row. Yadda, yadda, yadda.<\/p>\n<p>And where\u2019s the consumer spending bounce we\u2019re supposed to get from lower oil prices? Retail sales have fallen three straight months. The declines in December and January were due to lower gasoline prices, which reduced spending for sure, but sales were down again in February even though gas prices jumped. Consumer spending, a broader measure than retail sales, rose a scant 0.1% in February after falling 0.2% in each of the previous two months.<\/p>\n<p>Should this trend continue into the second quarter as the winter ends I just do not see how the Fed will have the cajones to move forward with a rate increase in the foreseeable future, possibly not anytime this year.<\/p>\n<p>Following its March FOMC meeting, the Fed did indeed drop the word \u201cpatient\u201d from its monetary policy statement, but as Fed Chair Janet Yellen noted almost immediately, that was largely just semantics (or the lack of same). \u201cJust because we removed the word patient from the statement doesn't mean we are going to be impatient,\u201d she said in her post-meeting remarks, which caused the stock and bond markets to rally on the belief that there would be no rate hikes for at least several more months. <\/p>\n<p>Speaking at a conference at the San Francisco Fed about a week later, Yellen said she expected that economic conditions \u201cmay warrant an increase in the federal funds target sometime this year,\u201d although \u201cthe appropriate time has not yet arrived.\u201d Indeed. After Friday\u2019s jobs report, my guess is that time won\u2019t arrive until 2016.<\/p>\n<p>We all know how deliberate the Fed moves. And Yellen and other Fed officials have said all along that monetary policy decisions will be \u201cdata driven.\u201d Well, the data so far this year is saying no rate increase in 2015.<br \/>\nVisit back to read my next article! <\/p>\n<p><a href=\"http:\/\/www.ino.com\/blog\/meet-george-yacik\/\" target=\"_blank\">George Yacik<\/a><br \/>\nINO.com Contributor - Fed & Interest Rates<\/p>\n<p><span style=\"font-size: 12px; font-style: italic;\">Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>Friday\u2019s jobs report was the final nail in the coffin for an interest rate increase in 2015. I know I shouldn\u2019t get carried away by one statistic, especially this early into the year. The nonfarm payrolls report is only one number \u2013 an important number, for sure, but still only one number \u2013 so one [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6920],"tags":[6938,7460,7459],"class_list":["post-32801","post","type-post","status-publish","format-standard","hentry","category-ino-com-contributors","tag-george-yacik","tag-interest-rate-increase","tag-job-reports"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Jobs Report Says No Rate Increase This Year - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ino.com\/blog\/2015\/04\/jobs-report-says-no-rate-increase-this-year\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Jobs Report Says No Rate Increase This Year - INO.com Trader&#039;s Blog\" \/>\n<meta property=\"og:description\" content=\"Friday\u2019s jobs report was the final nail in the coffin for an interest rate increase in 2015. 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