Next Week -- CPI Report

Don’t know why, but the jobs machine is reminding us of that Credence Clearwater song “Proud Mary.” — “rolling, rolling, rolling on the river.” For months the Federal Reserve has been waiting for the growth of jobs to slow, but it has not happened. As a matter of fact, the growth spurt has gone on so long that members of the Fed have gone out of their way to intimate that they can bring down inflation in a full-employment economy. Though it seems that slowing the pace of wage growth would have to be part of the equation.

This week we will have another picture of the situation. Analysts will not only be looking at how many jobs were added in February and the growth of wages, they will be looking for adjustments in the extraordinarily high number of jobs previously reported for January. Typically, January is a big month for job reductions because of companies letting go of seasonal workers after the holidays. That is what made the addition of 350,000 plus jobs in January so surprising. There could be the potential for a solid revision downward, but that is not guaranteed.

With the Fed meeting in mid-March, you can be sure they will be looking closely at these numbers. We will also see another consumer price index (CPI) release the week before the Fed meeting. This data will also be especially critical because of the hotter than expected inflation reports we received in mid-February. Last week the Fed’s favorite measure of inflation, the Personal Consumption Expenditures Price Index (PCE Inflation Index),was released and was in line with expectations, but still gave a similar view of the fight against inflation – lower year-over-year, but still a bit too high.