Too Many Jobs!

Non-Farm Payroll and Unemployment data were released today, and the US Economy is still chugging along... For those who feel Federal Reserve Chairman Ben Bernanke will lower rates in the near future, this news serves as a little cold water splash in the face. Unemployment is too low. Plain and simple.

There were 180k new jobs last month, versus the expectation of 135k. Unemployment dipped to 4.4%, versus the expected 4.6%. This is going to keep wage-side inflation persistent, since employers will need to compete for skilled workers by raising pay. And Bernanke has made it clear that no rate cuts will come until the inflation cinders have ceased to smolder. He may even need to hike rates one more time to cap things off.

The Fed Funds Rate remains a moving target, and the timing for adjustment of this rate back down has extended beyond what analysts expected a year ago. Evidence of inflation beyond the Fed's comfort zone has persisted in these types of news reports, and we won't see a change in Bernanke's tone until inflation gets back under 2%.

The meltdown in subprime lending is not going to directly lead to a Fed cut as many have speculated. Even if the housing market languishes due to an increase in supply and decrease in buyers, this needs to trickle through to the data in reports like those given today before the Fed will respond. Perhaps with all the mortgage companies shutting down, we will see a counter-weight to this tight job market...

... I'll be careful what I wish for.