Federal Reserve and the U.S.'s Economic Outlook

The Jobs report released on Friday by the Department of Labor showed a 180,000 increase in non-farm payrolls, and an employment rate that had fallen to 4.4 percent. The report should increase the Fed’s confidence that job growth will keep the economy on a stable trajectory, even with consumer confidence at low levels and with the difficulties in housing. The report should also allow Fed chair Ben Bernanke to breath a little easier for the time being. The Fed has primarily been focused on reducing inflation, whereas some commentators--including former Fed chair Alan Greenspan!--have suggested that a slowing economy is the biggest risk to the U.S. The data suggested that the U.S. economy could get through the year okay, but tight labor market data and the inflation numbers suggest that the Fed will need to raise rates to reduce inflation pressures.

Expect the market to fall on Monday as the news above reduces the chances of a rate decrease at the next FOMC meeting.