In Search Of Goldilocks: February Jobs & CPI Reports

Next up are the February Jobs report to be released this morning (Friday) at 8:30am EST and the February CPI next Tuesday morning at 8:30am EST. These are the two big economic reports that economists – including those at the Fed – monitor to asses the economy and make decisions about policy.

Markets are still expecting a few rate cuts this year and these reports will reset expectations about when the first one will come and how many there will be. A rate cut is pretty much off the table for March 20 but there is a lot of uncertainty about May 1 and June 12.

If the data is too hot, markets will worry about the first rate cut being pushed out and less rate cuts overall which could be hard on the economy. If the data is too weak, markets will worry that high interest rates are finally starting to take their toll on the economy. In other words, the market is hoping for Goldilocks (not too hot, not too cold) numbers.

January came in a bit hot with the economy adding 353,000 jobs and core CPI ticking up 0.4%. Economists are expecting about 200,000 new jobs in February. Investors are also hoping for a cool down in core CPI from January. With the major indexes at all time highs, anything outlying could be a recipe for trouble (see Sam Goldfarb, “Economic Data Pose Risk To Rally” [SUBSCRIPTION REQUIRED], WSJ B1 3/8).