It is one of the cases where «Good news» bring «Bad» Developments.
The American economy created 162,000 new jobs in August, compared to just 55,000 expected by economists in a recent Bloomberg survey.
Newer statistical data represent a significant recovery compared to July, when only 21,000 positions were eventually created (as opposed to an initial estimate for a loss of 23,000 posts)
But the good news about the labour market complicates the situation for the Fed.
And the reason is simple: Strong employment reduces concerns about slowing down the economy and allows Fed to focus more on the inflation target running at rates significantly above 2%.
Thus, the chances of increasing interest rates from Fed by 0.25 percentage points at the meeting on 16 September were raised (after the publication of employment figures) from around 50% to 60%, according to polls economists.
Reverse Reading
Tram immediately caught the weather but read backwards the dollar numbers were strengthened.
In a post with enough indignation it characterizes employment elements as wonderful and unexpected for all (in addition to itself, as it says) and calls for an immediate reduction in interest rates, threatening to end trade relations with countries against which the US has a trade deficit.
However, there is one element that mitigates the positive picture: wages increased by 3.1% annually, i.e. at a lower rate than inflation.
In practice, this means that long-term inflationary pressures may not be as suffocating as possible.
In any case Donald Trump still asks for lower interest rates, arguing that the power of the American economy justifies lower lending costs.
However, several economists quoted by FT consider that the new employment figures strengthen the camp more in favour of an increase than a reduction in interest rates.
A similar view was also recently expressed by economists and market officials after the Wars speech in Jackson Hall.
He has chosen sides
The phrase of Iswar Prasad, Cornell, is indicative:
«Wars has drawn a clear line with his goals and intentions, which will bring him into direct conflict with Trump's pressure for lower interest rates», while other colleagues appreciated that the Wars speech in Jackson Hall showed that between appeasement of Trump and serving the needs of the economy, the head of the fed will choose the second, i.e. prioritizing inflation, which now exceeds the Fed target for 2% for five-and-more-years.
At the moment, though, Trump is not turning his fire on Wars, which he's marking. «Great leader» of the Fed, but calling the governors of the Bank «for once to act Patriotic».
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