John J. Edwards III
The obsessively anticipated
report emerged at long last Friday morning, and its mix of moderate job growth and strong wage increases swiftly hammered the stock and bond markets for losses. Equities later recovered, but economists agreed that the bond market took the right cue: The
is as likely as ever to raise short-term interest rates again May 20.
The headline numbers in the employment report were the 5.2% unemployment rate, down from 5.3% in February, and the 175,000 new jobs, down from a revised 293,000 in February and better -- in market terms -- than the consensus forecast of 193,000.
But the headlines obscured all sorts of worrisome signs of a booming economy, economists said. Frazier Evans, senior economist at
Colonial Investment Services
in Boston, noted that the seasonal adjustment factor trimmed the job-growth figure by 100,000.
For Evans, the most important figure in the report was the index of hours worked in the private sector. In the new report, that figure stands at 140.5, down from 140.6 in February. "It was so strong the prior month, and it didn't give up much of that strength," Evans said. "That suggests this will be a 3.5% to 4% quarter in real
gross-domestic-product growth. That means we will have had two quarters of well-above-average GDP, and you can't have quarter after quarter of GDP growth of this magnitude without having more wage pressures than we have already."
Stuart Hoffman, senior vice president and chief economist at
, pointed out that new jobs were inflated in February by an unusual boost in construction hiring. That made the March figure unusually low, "so it's probably a good idea to take the two months and average them together," he said. He called the resulting figure, 234,000, "well above the trend that indicates a slowing in the economy."
Hoffman said that if upcoming economic reports reflect similar strength -- the next big one is
March retail sales
, out April 11 -- the Fed is all but certain to hike rates again. Mickey Levy, chief financial economist at
NationsBanc Capital Markets
, agreed with that take but continued to insist that the Fed is reading the economy wrong.
"As long as the Fed follows a disinflationary monetary policy, there is no way rising wages will generate higher inflation," Levy said. "The Fed should understand that, but it doesn't."
Levy said the employment report wasn't the best figure to focus on because it lags the economy, revealing little about the future pace of growth. "The big issue going forward is what happens to the demand side of the economy," he said, urging a close reading of the retail sales report.
Oh, and Monday's data? There's not much going on, for a change.
(1 p.m. EDT): $13.0 billion in three- and six-month bills; $18.8 billion maturing.
(3 p.m. EDT): For February. The consensus median estimate is $7.0 billion, compared with $8.4 billion in January.