What Should the Fed Think of the Economy’s Clearly Gaining Momentum?: Daily Focus
Economy Clearly Gaining Momentum:
“The November employment report came in ahead of expectations…
…with a monthly nfp gain of 321k and 44k of upward revisions to previous months. Job gains were spread throughout the major sectors of the economy. The 2014 acceleration in job growth is clearly evident. The employment report in the context of indicators previously identified by Federal Reserve Chair Janet Yellen as important to watch.
Measures of underemployment are generally moving in the right direction. To be sure, the labor force participation rate remains in a general downward trend, but on this point I think you have to accept that demographic forces are driving the train. Year-over-year wage growth remains anemic although average wages gained 0.37% on the month.”
May I say that I believe that it is inappropriate for the Federal Reserve to raise interest rates before it sees at least two quarters in which inflation averages 2%/year and wage growth averages 3%/year or more?
Seriously: now is the time for the Federal Reserve to establish its credibility on the point that, if the economy enters a liquidity trap, the Fed is going to keep stimulating until the economy is out of the liquidity trap and interest rates can normalize. If the Fed does not do this now, future Fed Chairs will curse its name.