Will Unemployment Press the Fed to Raise Interest Rates in March?

This Friday’s unemployment report is also one of the freshest economic views before Federal Reserve Chair Janet Yellen and the Federal Open Market Committee members decide whether to raise interest rates at the March FOMC meeting. What the markets need to consider is that Yellen’s speech from March 3 was the most pointed pro-rate-hike speech she has ever given.

The current estimates are subject to change after the monthly ADP payrolls and after the weekly jobless claims from the Bureau of Labor Statistics (BLS) hit the tape.

Bloomberg is projecting that the unemployment rate will drop to 4.7% in February from 4.8% in January, and its Econoday range of estimates was 4.6% to 4.8%. Dow Jones (Wall Street Journal) is calling for a consensus 4.7% on the official unemployment rate.

Bloomberg’s consensus estimate on nonfarm payrolls is 195,000 for February, down from 227,000 in January’s preliminary reading. The range of estimates was shown to be 162,000 to 220,000. Dow Jones has the nonfarm payrolls consensus estimate at 192,000.

The private sector payrolls, which aims to filter out the government jobs, is projected by Bloomberg to fall to 190,000 in February (from 237,000 in January). The range of estimates was 168,000 to 215,000.

Several other key issues will be watched as well, and here is how the figures looked in January:

  • The laborforce participation rate was previously 62.9%.
  • Average hourly earnings were up just 0.1% (up three cents to $26.00 per hour).
  • The average workweek was flat at 34.4 hours.

The BLS employment situation’s household survey is based on a review of some 60,000 households. Each month’s data is revised a month later and periodically down the road.

24/7 Wall St. has recently covered the unemployment rates of each state, and Detroit still has 100,000 unemployed people.

As a reminder, the conclusion statements of Yellen’s speech showed that the FOMC chair is rather comfortable with where the unemployment rate is now and its ability to adjust to interest rates. Her speech said:

The economy has essentially met the employment portion of our mandate and inflation is moving closer to our 2 percent objective. This outcome suggests that our goal-focused, outlook-dependent approach to scaling back accommodation over the past couple of years has served the U.S. economy well… we realize that waiting too long to scale back some of our support could potentially require us to raise rates rapidly sometime down the road, which in turn could risk disrupting financial markets and pushing the economy into recession. Having said that, I currently see no evidence that the Federal Reserve has fallen behind the curve, and I therefore continue to have confidence in our judgment that a gradual removal of accommodation is likely to be appropriate. However, as I have noted, unless unanticipated developments adversely affect the economic outlook, the process of scaling back accommodation likely will not be as slow as it was during the past couple of years.