The rollercoaster has hit a flat spot. After stomach-churning swings in payroll numbers, Friday?s figures provided a moment of calm, but little to change the political or economic debate. The 144,000 new jobs in August, coupled with upward revisions to the anaemic June and July figures, give the Republicans room to claim that they are creating employment. The Democrats can safely say that, by the election, the Republicans will have presided over a net loss of jobs. The Federal Reserve, meanwhile, can stick to its plan for a measured removal of ultra-accommodative monetary policy.
The volatility of the economic data has kept markets on their toes. Inflation surged in the spring, but has sunk back into a summer slumber. The healthy payroll figures of the same period plunged before bouncing back to Friday?s reasonable level, probably enough to soak up new entrants to the workforce but not to make inroads into unemployment levels. Retail sales have bounced from month-to-month. But the Fed has, rightly, kept a level-headed view and not reacted to monthly swings. While the economy has slowed, there is no clear evidence against the Fed?s position that the economy is in a soft spot. Another 25 basis point rate rise in September remains on the cards, with a good chance of a further increase before the year is out.
A clearer trend in the data would be needed to change the Fed?s plan for slowly weaning the economy off crisis level interest rates.