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March Existing Home Sales and Chicago Fed National Activity Index

KEY DATA: Sales: +1.1%; Over-Year: -1.2%; Prices (Over-Year): +5.8%; Inventory: 3.6 months/ CFNAI: -0.88 point

IN A NUTSHELL: “Given the paucity of houses on the market, home sales are doing about as well as can be expected.”

WHAT IT MEANS: Sometimes sellers are in the driver’s seat and sometimes buyers have the upper hand. Right now, sellers are the kings in the housing market. The National Association of Realtors reported that new home sales rose in March, but minimally. Weather suppressed closings in February in the Northeast and Midwest, but that turned around in March. Still, the level of sales remains restrained and compared to March 2017 was either down or up modestly. The problem remains the lack of homes for sale. Adjusting for the sales rate, there are only 3.6 months of supply. Though that is up a little from what we have seen over the past few months, it is about two years less than desirable. The lack of available homes is not only limiting sales but it is also leading to continued high price increases.

The Chicago Fed’s National Activity Index tanked in March, indicating that economic growth slowed during the month. This moderation in activity is consistent with a variety of other indicators and is pointing to a GDP growth rate for the first quarter that may be quite disappointing.

MARKETS AND FED POLICY IMPLICATIONS: The housing market is in decent shape, but it is not in great shape. It is hard to sell homes that are not on the market and there just are not a lot of people willing to let go. That is a real concern since solid demand and low supply leads to higher prices. Yes, higher prices should induce people to list their homes, but the decision to sell is a lot more complicated than just one of price. You then have to move and that means finding another home to buy or finding a rental unit. And that process is difficult if there are not a lot of options available. On top of that, longer-term rates are rising. The 10-year Treasury note is nearing 3% and mortgage rates are following suit. So, we having rising prices and rising mortgage rates, a combination that creates real concern for realtors. In addition, the expected surge in economic growth that was (and still is) expected from the tax cuts has not yet shown up. Estimates for the first quarter are coming down and are approaching 2%. I am a bit more optimistic, but a little shaky about my 2.6% number. The first estimate of first quarter growth comes out on Friday. For investors, the latest economic reports can only create confusion. In general, earnings have been good, but you have to ask what is real and what is tax-created. And if GDP is lower than expected and inflation higher, the markets may not take the news very well. But that is just an economist talking. At the least, we are likely in for more wild days ahead.

February Job Openings and April Consumer Sentiment

KEY DATA: Openings: -176,000; Hires: -67,000; Quits: +19,000/ Sentiment: -3.6 points

IN A NUTSHELL: “The labor market may be strong, but it does have its ups and downs.”

WHAT IT MEANS: The disappointing, but not overly surprising March jobs numbers raised some questions about whether economic growth has moderated recently. Adding a little uncertainty to the situation was the report on job openings and labor turnover, the so-called JOLTS report. This was one of past Fed Chair Yellen’s favorite releases, but it is not clear if current Chair Powell shares the same view. Regardless, job openings shrank in February. Reductions in restaurant, construction and wholesale trade more than offset expanding need for workers in finance and local government. Hiring moderated as well. Now that may seem weird given the huge number of jobs added in the monthly payroll report, but the two don’t have to work in concert because total payrolls are the difference between total new hiring and job reductions. Regardless, for me, the most important number is the quit rate, which reflects the willingness of workers to leave their jobs. While the number of people willingly leaving positions rose, when adjusted for total employment, the quit rate remained constant. Thus, the churn that in the past would force firms to bid for labor is still not rising sharply.

The University of Michigan’s Consumer Sentiment Index moderated in early April, which is hardly a surprise. As noted in the report, a fairly significant proportion of the respondents mentioned the tariff/trade war talk and it doesn’t look as if they think it will be a positive for the economy. Views on current conditions and future activity were both down, reflecting the uncertainty. Finally, it looks as if the index may have peaked and is on a downward trend. Over the year, the sentiment index is and its components are either barely up, or in the case of expectations, actually down. That is not good news for future consumer demand,.

MARKETS AND FED POLICY IMPLICATIONS: While the JOLTS report doesn’t say that labor market conditions are firming, the level of most of the components indicates that conditions remain extremely tight. Though a sentiment decline that is the result of political issue may not have a lasting impact on the economy, with consumer debt levels high and the savings rate low, weakening consumer confidence could affect spending more than normal. The surge in household confidence helped maintain consumer spending and added to the willingness to take on debt. Sentiment is still high, but a continued softening could cause growth to slow. Meanwhile, back in Washington, who knows what will happen next. Really, re-entering the TPP? Wasn’t it supposed to be a total disaster? Coincidentally, at a client meeting on Wednesday, I mentioned that the real purpose of TPP was to isolate China and force it to make concessions. I thought it was a better strategy, even given the faults in the agreement, than tariffs and trade wars. I had no idea that Trump would ask his economic advisor and trade rep the next day to look into possibly joining TPP. But now that he did, maybe we can look at the agreement through less political lenses and see it for its strengths, not just its weaknesses.

March Private Sector Jobs, Non-Manufacturing Activity and Help Wanted OnLine

KEY DATA: ADP: +241,000; Goods: +65,000/ ISM (Non-Man.): -0.7 point; Orders: -5.3 points/ HWOL: up 102,100

IN A NUTSHELL: “Ultimately, the stock markets will reflect the economy and right now, all systems are go.”

WHAT IT MEANS: Another day, another wild ride on the investor equivalent of Disney’s Space Mountain. And like the ride, market participants seem to be operating in the dark. But they shouldn’t be. While a trade war could devastate the economy, conditions right now are quite good. Take the job market. ADP’s look at the private sector always precedes the government’s report, which will be released Friday. If the two are in sync (synchronized, not the boy band), we should get a really strong March employment report. The job increases were spread across the entire economy, with robust increases in construction and manufacturing. Every size firm, but especially mid-sized companies, added workers at a huge pace. The government’s numbers tend to be a bit more volatile than ADP’s, so don’t be surprised if there is a big miss. Even if there is, it is clear the labor market is in great shape.

The Institute for Supply Management’s March reading on the non-manufacturing sector looks just like its report on manufacturing: Conditions have moved from robust to very strong. In other words, things are just fine. Even the large slowdown in order growth is not a major concern. The level of demand remains strong enough that backlogs are growing and hiring is accelerating.

With ADP saying job demand is strong and the Supply Managers indicating that hiring is increasing, it should not have been a surprise to see that the Conference Board’s measure of online want ads surged in March. Every sector, except strangely restaurants, increased their advertising activity. Only in New England did the number of want ads drop. There are a significant number of occupations where the volume of ads exceeded the number of unemployed in that profession looking for jobs. Healthcare and computer sciences are almost devoid of supply and in those as well as a variety of other areas, wage pressures have to be significant.

MARKETS AND FED POLICY IMPLICATIONS: We are entering earnings season and the first quarter reports should be good, if the economy is any factor in creating profits. Where those profits, as well as the gains from the tax cuts are going is not totally clear, but for the first time in history, no S&P 500 company cut its dividend. That says something. Dividends also hit record highs. And stock buybacks are soaring as well, so when you look at the economic and stock fundamentals, it makes you wonder what is going on in the equity markets. Actually, everyone knows. One day, the president is Tweeter-Dee and the next he is Tweeter-Dum and that is creating the looking glass issue for investors. But while equity market volatility may result from the president’s tweet-creating uncertainties, for the Fed members, the fundamentals are clear: The economy is strong. Thus, they will be focusing on the inflation signals. No matter what the headline job number looks like, the data point you want to look for on Friday is wage growth. If that is high, as I expect it to be, start pricing in another rate hike in June. With economic growth so good, the Fed knows it can raise rates without doing damage and that is what the FOMC will do.

February Consumer Confidence, January Durable Good Orders and December Home Prices

KEY DATA: Confidence: +6.5 points/ Orders: -3.7%; Excluding Aircraft: -1.2%; Capital Spending: -0.2%/ FHFA Prices (Over-Year): +6.7%/ Case Shiller (Over-Year): +6.3%

IN A NUTSHELL: “Consumers are exuberant and hopefully that will translate into more spending as firms don’t seem to be cranking up their investment activity.”

WHAT IT MEANS: There are lots of smiles on the faces of consumers these days. The Conference Board’s Consumer Confidence Index jumped in February, reaching the highest reading in over seventeen years. That was when the dot.com bubble started to burst in everyone’s face. The views on both current and future conditions were up sharply, a very positive sign. We will find out Thursday, when the January consumption numbers are released, if the good feelings are translating into better spending.

I suspect that sometime in the future, businesses will spend some of the massive increase in after-tax earnings on capital goods, but as of now, there are no signs that is actually happening. Durable goods orders crashed in January, but that was due to a huge drop off in commercial aircraft purchases. Don’t worry, Boeing is doing just fine. But aircraft was not the only weak sector. Demand was also down for machinery, electrical equipment, appliances and primary metals. Purchases of computers and communications equipment did jump and orders for vehicles edged upward. But the closely watched measure of capital spending, orders for non-aircraft, nondefense capital goods, declined for the second consecutive month and have really gone nowhere for the past three months. Maybe firms were waiting for the tax law to pass and it is taking them time to determine exactly what they should spend their profits on, but it would be nice if this measure were actually rising.

Two reports on housing prices were released today and both tell basically the same story: Housing prices are rising sharply. The Federal Housing Finance Agency’s December and fourth quarter data indicated that prices rose modestly in December but were up quite strongly over the year. The S&P CoreLogic Case-Shiller National Index was up slightly less over the year, but the difference was not huge given the way prices are measured.

MARKETS AND FED POLICY IMPLICATIONS: Feeling good is nice and having corporate coffers filled to the brim could also be good, but those two things have to actually lead to additional business and consumer spending if the economy is to grow more rapidly. So far, there is little indication that has happened. Of course, it has not been that long since the tax bill passed, so we need some patience.   Increasing capital spending only makes sense if it increases earnings and exactly how to invest is not a simple decision. Similarly, for most workers, the increase in after-tax pay will kick in slowly over the year. So don’t expect a sudden surge in either consumer or capital spending. And with the new Fed Chair making it clear that market volatility will not deter the Fed from its rate and balance sheet normalization plan, look for rates to continue to rise. When that is combined with sharply rising housing prices, the outlook for construction becomes a little clouded. In other words, growth this year should be strong, maybe even in the 3% range, but to get there, current business and consumer spending patterns have to change.  

January Existing Home Sales

KEY DATA: Sales: -3.2%; Over-Year: -4.8%; Prices (Over-Year): +5.8%; Inventory (Over-Year): -9.5%

IN A NUTSHELL: “When you add rising mortgage rates to surging prices and a lack of inventory, it is hard to see that home sales will boom anytime soon.”

WHAT IT MEANS: The housing market has been solid and it remains that way, but there are holes developing in the story that residential real estate will be a leading factor in growth this year. The National Association of Realtors reported that existing home sales were off in January, the second consecutive drop. The declines came after a very strong November number, so maybe the easing in sales could have been expected. Sill, if you average the last three months, the sales pace was only slightly above the 2017 rate, which is not a sign of strength. We cannot really blame weather for the January slump as sales were off in all four regions of the country. The problem is that there are simply few homes on the market. While the inventory did rise a bit in January, it is still way off the level seen the previous January, and that was pretty low. With few homes to purchase, buyers are bidding up prices, which continue to rise sharply. They are up by about 7% or more in three of the four regions, with only the South posting a moderate increase.

MARKETS AND FED POLICY IMPLICATIONS: For months, maybe even years now, we have blamed the lack of homes on the market for the relatively low level and modest rise in the sales of homes. And those explanations still make sense. People are just not moving and it is hard for buyers to find the house that they want. And now, interest rates are starting to rise. So, what will happen to the market? First, I do not subscribe to the belief that mortgage rates above 4.5% are a death knell to demand. As I have noted before, the housing bubble formed when rates were between 5.5% and 6.5%. But back then, supply was ample. Now it isn’t. The combination of low inventory and rising rates does not bode well for prices. But not what would be expected: Prices could surge! Buyers have been comfortable biding their time, as rates have been low and stable for so long. But a clear upward trend in mortgage costs would likely cause fence sitters – both those who are already in the market as well as those considering getting into it – to take the leap. That would bid up prices. Hopefully, those higher home values will induce owners to consider selling and given the changing locational preferences of boomers, that is very possible. Without added supply, we could be in for a boom then a bust in housing prices, if mortgage rates jump. I don’t see that happening, though, until late this year or the first half of next.

January Industrial Production, Producer Prices and Weekly Jobless Claims

January Industrial Production, Producer Prices and Weekly Jobless Claims

KEY DATA: IP: -0.1%; Manufacturing: 0%/ PPI: +0.4%; Less Food and Energy: +0.4%; Goods: +0.7%; Services: +0.3%/ Claims: +7,000

IN A NUTSHELL: “Business confidence may be sky-high, but it would be better if actual business activity was growing faster.”

WHAT IT MEANS:   “Watch what I do, not what I say” is the phrase we should be thinking about right now. Surveys are showing businesses are exuberant. According to the National Federation of Independent Business Chief Economist Bill Dunkelberg, “The historically high index readings over the last year tell us small business owners have never been more positive about the economy”. Similarly, the most recent Conference Board Measure of CEO Confidence jumped. Well, what is happening in reality? Apparently, not much. Overall industrial production declined in January and manufacturing output was flat for the second consecutive month. That is hardly a sign of a booming economy. There were some strong sectors. Motor vehicle assembly rates increases, helping power a rise in metals output. There were also solid increases in the production of petroleum, textiles, electrical equipment, computers and appliances. A rebound in business equipment output implies that businesses may be ramping up investment spending. But that is still to be seen.

Meanwhile, the drumbeat of higher inflation is getting louder. The Producer Price Index jumped in January, the fifth time in sixth months the index was up by at 0.3%. Yes, energy prices soared, but excluding that sector, prices still rose solidly. Over the year, wholesale prices increased 2.7% and just about every special segment of producer costs has posted gains in excess of 2%. In other words, the price increases are spread across the entire economy.

Weekly jobless claims rebounded last week, but that was from historic lows, so the rise doesn’t mean much. Businesses want to retain workers and the incredibly low level of claims supports that view.

MARKETS AND FED POLICY IMPLICATIONS: After a short scare, investors seem more than willing to look past things such as accelerating inflation and rising interest rates and focus on what they believe will be the never-ending benefits from the tax cut legislation. But it does appear as if higher inflation is here to stay. The latest surveys by the New York and Philadelphia Federal Reserve Banks found that about half of the respondents expect to get higher prices for their goods in the next six months, while very few thought prices would fall. In the Philadelphia report, a special question on prices and compensation showed that inflation expectations increased from three months ago. This should be a concern for Fed members, who consistently argue that inflation expectation are “well anchored”. Well, maybe that anchor is started to come loose. While equity investors are shrugging off the inflation data, the bond markets are not. The ten-year Treasury note hit its highest rate in over four years while the 2-year note reached a 9½-year high. Just a few months ago, before the surge in rates, many investment “gurus” were saying the economy would crash and burn if we got to 3% on the 10-year. Yet here we are with a rate that is just a few basis points from 3% and the equity markets are rising. So, is the exuberance in the stock markets rational or irrational? Where is Alan Greenspan when we really need him? I hardly expect new Fed Chair Powell will be making any comments that could roil the markets, even if he should be asking some really hard questions.

January NonManufacturing Activity and Employment Trends Index

KEY DATA: ISM (NonManufacturing): +3.9 points; Orders: +8.2; Employment: +5.3 points/ ETI (Over-Year): +5.4%

IN A NUTSHELL: “The non-manufacturing portion of the economy seems to be kicking it up a notch and that bodes well for growth this year.”

WHAT IT MEANS: The economy is in really good shape, which is odd given that investors seem to be suddenly worrying about things. The manufacturing sector, though not booming, is solid while the service sector is getting even better. The Institute for Supply Management’s NonManufacturing Index jumped in January, led by a resurgence in new orders. To meet the growing demand, hiring is accelerating. Even better, order books are starting to fill even further. In other words, conditions are go for this segment of the economy.

The improving condition of the economy, which was already good to start with, is driving up demand for workers. The Supply Managers’ survey was not the only one to show that. The Conference Board’s Employment Trends Index rose strongly in January and is up sharply over the year. The implications are clear: Conditions will only getter better going forward. Or, as was stated in the report, “The Employment Trends Index continues its solid path upwards and shows no sign of slowing down”.

MARKETS AND FED POLICY IMPLICATIONS: The stock markets may finally be starting to focus on the real side of the economy, which may explain some of the current correction. As I have noted, expansions don’t simply fade away. They are caused by either bubbles bursting, such as the tech and housing bubbles, or policy mistakes, such as the Fed jamming on the brakes. But while investors have celebrated, and rightly so, the massive corporate tax cuts, economists have worried that expansionary fiscal policy piled on top of a solid economy and labor shortages could be categorized as a policy mistake. And the Fed members may be seeing that as well as their focus on inflation seems to have intensified. What needs to be determined is whether the acceleration in activity is too much of a good thing and if it is, how much is the ‘too much’. The course of both inflation and wages over the past couple of years has not conformed with normal economic theory. For every theory there is a counter-argument. For example, I have heard the argument that the number of people in the 24-55 age group who are not in the workforce is unusually large and that may represent a major source of potential labor. In rebuttal, it is argued that many of those people cannot pass a drug or background check and have given up looking for work because they know they will not be hired. Which is the correct interpretation? We don’t know, because the data on the characteristics of the unemployed, at least as it comes to drug or background issues, doesn’t exist. Yet it is critical because it speaks to the extent of the actual labor shortage and the impact of the tax cuts not just on economic growth but on wage and price inflation and the potential course of interest rates. The lack of clarity about growth and inflation is likely to create a lot more volatility going forward.

 

December Producer Prices and Weekly Jobless Claims

KEY DATA: PPI: -0.1%; Goods: 0%; Services: -0.2%/ Claims+11,000

IN A NUTSHELL: “Falling food and trade costs are helping keep producer expenses under control.”

WHAT IT MEANS: With the 10-year Treasury note approaching levels rarely seen in the past 3½ years, questions are being raised about how high it will go over the next year. Implementing expansionary fiscal policy when the economy is growing decently and the labor market is tight is a risky experiment, as it raises the risk that inflation could accelerate faster than expected. But those effects are not likely to be seen right away since it could take months before the tax cuts make much of a difference in consumption. It actually has to show up in paychecks and then be spent. Until that happens, we have to watch leading indicators of consumer prices and the Producer Price Index is one of them.

Wholesale costs fell in December, led by a sharp decline in food prices. I am not sure what is going, but the drop was broad based as thirteen of the twenty food sectors posted declines. I expect that drop will be reversed pretty quickly. Energy costs were flat and we know that oil prices have surged lately. On the services side, trade costs cratered. I suspect that the decline was overdone, but wholesale and retail services are likely to remain well contained for a long time. However, transport costs are likely to keep surging. Basically, this report, while looking tame for now, could look a lot different next month. And going forward, don’t be surprised if producer prices keep trending upward as intermediate prices are rising more strongly than finished goods and services prices. There are cost pressures building in the pipeline.

New claims for unemployment insurance jumped last week and the trend is slightly upward. That is strange given all the other data on layoffs. In addition, the number of claims was up compared to last year. They had been down over the year for about eight years. It is too soon to say a trend is developing, but it is worth watching.

MARKETS AND FED POLICY IMPLICATIONS: Energy costs are rising, but there doesn’t appear to be any major, widespread acceleration in producer prices. Indeed, the tax breaks should provide an earnings cushion so businesses have the capacity to limit price increases even if expenses rise. Thus, it is hard to see that inflation will soar anytime soon. But pressures are building and stronger growth will only exacerbate the problem. I do think that consumer inflation will hit the Fed’s 2% target by mid-year and start consistently exceeding it during the second half of the year. But until that happens, the Fed has some room to allow prices to rise. As for investors, any excuse to keep the rally going will be used and now that we are in earnings season, there may be lots of reasons for equities to do well. I expect that fourth quarter earnings were strong.

December Small Business Optimism and November JOLTS report

KEY DATA: NFIB Index: -2.6 points/ Job Openings: -46,000; Hires: -104,000; Quits: -13,000

IN A NUTSHELL: “Despite a modest decline in optimism, small business owners remain exuberant and that should lead to greater job growth, if they can find the workers.”

WHAT IT MEANS: Small is good, at least when it comes to job creation, so near record levels of small businesses optimism is something to celebrate. Yes, the National Federation of Independent Businesses Small Business Optimism index did recede in December, but it remained near record highs. That was reached right after the Reagan tax cuts were passed, so you can probably say that small business owners are big on tax cuts. They would like to hire more workers, but they continue to be constrained by the lack of qualified workers, especially in construction and manufacturing. What is interesting in the report was the difference between actual conditions and optimism. Earnings growth is slowing, sales are moderating and costs, especially wages and compensation, are rising. Yet there is optimism about future sales. Owners are making plans to hire more workers, yet 54% of the respondents said they could find few or no qualified applicants. As for capital spending, there has yet to be a surge in plans to invest.

The lack of workers that small businesses are finding is a universal issue. While the number of job openings eased in November, it remained extremely high. It is likely the slowdown in hiring is due to the lack of labor turnover. Despite what appears to be an employee market, workers are just not quitting their jobs and making themselves available to the highest bidder. On top of that, the rate of layoffs and discharges is almost at an historic low. There is just no churn in the market and that is restricting the ability of companies to find “qualified” workers.

MARKETS AND FED POLICY IMPLICATIONS: Over the next few months, workers will start seeing their paychecks boosted by the tax changes. For some it will be minimal but for many it may be enough to generate stronger spending. Meanwhile, businesses will be making plans for the surge in after-tax earnings that will be staying in their bank accounts. We are seeing a variety of announced plans, ranging from workers bonuses to massive stock buybacks. What is likely coming is a flood of mergers and acquisitions. In a perverse way, that may be good for the labor market as lots of workers will lose their jobs, adding to supply. It is going to take a long time for the effects and consequences, intended or not, of the tax changes to become clear. Until then, the exuberant investor will likely remain that way. As for the Fed, it looks like it still is all about inflation or expected inflation. I suspect it will take an extended period of above target price increases to get the Fed to tighten as many as three to four times this year. But that is not out of the question. My forecast of at least three moves last year won me lunch and I am betting another lunch on four moves this year.

December Jobs Report and November Trade Deficit

KEY DATA: Payrolls: +148,000; Private: +146,000; Revisions: -9,000; U-Rate: 4.1% (Unchanged); Wages: +0.3%/ Trade Deficit: $1.6 billion wider

IN A NUTSHELL: “While the headline job gain number may have disappointed, the average over the last three months was still very strong.”

WHAT IT MEANS: We are starting to get the final 2017 data with the first big one being the jobs numbers. To many, the 148,000 jobs created was a disappointment. But this is a classic example of why you need to understand the pattern of the data, not just look at headline number. Yes, there were fewer positions added than many had forecast, but the jobs numbers are volatile. Over the last three months, an average of 204,000 new positions were created. That is very strong job growth that is likely not sustainable. In December, the job gains were led not just by health care, but also by robust increases in construction and manufacturing. These sectors are helping carry the load and show that the fundamental economy is in good shape. They also offset a large decline in the faltering retail sector.

A second reason to be confident about the economy is the unemployment rate, which remained at an extremely low 4.1%. As a result, wage increases are picking up. The 2.5% increase over the year may not be as high as most workers would like, but it is getting there. The stable participation rate is also a good sign. It is likely that a growing number of people are entering the workforce as to offset the rising boomer retirement rate. Still, with the labor force expanding at a modest 0.5% pace over the year, it will be hard to maintain strong job and economic growth for a sustained period.

 

While the trade deficit widened again in November, it did so for all the right reasons. The world economy is finally in synch and that means we have growing markets across the world. Exports expanded solidly with every major category posting gains. The rise was not simply due to increasing petroleum prices. But the strong U.S. economy is also sucking in goods from the far corners of the world and as is usually the case, doing so faster than we can sell to foreigners. The only category of imports that was down was food.

MARKETS AND FED POLICY IMPLICATIONS: Supposedly, there is a vast army of potential workers sitting around who have skills, who can pass drug and background checks and who want to work. If you believe that, I am selling even more shares in my next Broadway show. The idea that the “animal spirits” will cause job growth to soar would make sense if there weren’t a shortage of workers already. Unless companies are making up the story that their biggest problem is finding qualified workers, we are not likely to see the hoped-for 200,000 or more job gains per month. Firms are already laying few people off so they may have to find ways to keep people from retiring or quitting. That can only be done by making it worth the workers’ while to stay on. In other words, by paying up. To the extent bonuses are used and that doesn’t show up in average hourly wages, we may be looking at bad wage data. So, watch the quarterly Employment Cost Index, which next comes out on January 31st. That does a little better job at getting at total compensation. This is important because it is clear from the latest Fed minutes that there is a schism at the Fed over how much to raise rates this year. Accelerating labor compensation costs would worry even the doves at the Fed. So, don’t assume the less than expected headline job growth number will be a moderating factor in Fed rate hike thinking.