Report | Look to the Labor Market for January 10, 2018
Although job growth superficially disappointed in December, the overall results were encouraging. The unemployment rate and the labor force participation rate held steady and wage growth accelerated slightly. The labor market expanded for the eighth consecutive year, although job gains fell for the third consecutive year, a trend we expect to continue in 2018. Despite this slowing, the labor market should further tighten, putting upward pressure on wages and inflation. The Fed will be paying close attention to the labor market – it will likely be the catalyst for stronger wage growth and inflation which could spur more rate hikes. Yet, even if the trends remain largely unchanged, we expect the Fed to raise rates three times this year with the first likely coming in March. The interest rate environment should remain largely benign this year, but the cumulative impact of rate increases over time will begin to weigh on the economy.
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