April 9, 2018 — Job Creation Slows; Powell Speaks as New Fed Chair

APRIL 9, 2018 – JOB CREATION SLOWS; POWELL SPEAKS AS NEW FED CHAIR

The nonfarm payrolls for March were announced last week with an increase of 103,000, which was below expectations.   The unemployment rate held steady at 4.1 percent.

The jobs numbers were disappointing, though not unexpected.  Part of the drawback is attributable to weather-related issues according to the Bureau of Labor Statistics. Also, with an economy nearing full employment, the pace of hiring will likely slow at this point of the expansion.  Average hourly earnings rose 0.3 percent, beating an anticipated 0.2 percent growth.  Annualized wages are up 2.7 percent.  The Fed is watching the monthly job numbers diligently.  The Fed is keeping an especially close eye on wages for signs of inflation.

In his first speech as the leader of the Fed, Jerome Powell addressed the Economic Club of Chicago Friday.  He said the Fed is committed to raising rates gradually unless events change.  The Fed is continuing to balance the risks of moving too slowly and running the risk that inflation gets out of control, and moving too quickly which could hurt growth.  Indications remain the Fed will stick to three rate increases in 2018.

As the Fed continues to proceed cautiously regarding interest rates, the opportunity exists to capitalize during this low rate environment.  We continue to recommend interest rate swaps as the best hedging strategy, at this time, to guard against future rate hikes.