1st Time Unemployment Claims, Continued Claims Remain Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 226,000 1st time claims for unemployment insurance for the week ended March 10 a DECREASE of 4,000 from the prior week;
  • The number of initial claims for the week ended March 3 was REVISED DOWN 1,000 to 230,000
  • The four-week moving average of first time claims FELL 750 to 221,500;
  • Four week moving average represented 0.143 percent of employment, UNCHANGED from the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, for the week ended March 3 was 1,879,000, UP 4,000 from the previous week’s UPWARDLY REVISED 1,875,000;
  • The four-week moving average of continued claims DECLINED 17,250 to 1,890,750;

Data Source: Department of Labor 

Trends:

  • The number of continued claims for unemployment insurance has been below 2,000,000 for almost a year (48 weeks since last April 1) underscoring the tightening labor picture by shrinking unemployment rolls;
  • The moving four-week moving average of initial claims has been below 300,000 for even longer: since March 2015.

 

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Even with occasional blips up, the weekly report on unemployment insurance claims – both first-time and continued – reflects the labor market with fewer and fewer employers laying off workers and more and more dipping into the ranks of the unemployed to add to (or restore) staff.

All of this makes for a head scratcher for the Federal Open Market Committee which meets next Tuesday and Wednesday to consider interest rates. Only one outcome is certain: the FOMC is not going to lower rates but is poised for yet another increase in the benchmark Federal Funds rate in an effort to slow what may be an overheating economy.

The Fed’s own industrial production and capacity indices are at or near record high levels while the capacity utilization rate – not at record levels – is at the highest levels since the end of the Recession. ‘

Both suggest an economic conundrum which could be solved with market expansion which Congress tried to do with its tax cut. The expansion of overseas demand though may be choked off by responses to the imposition of higher tariffs on imported goods. Retaliation by trading partners would choke off increased demand overseas.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

Economy Adds 313k Jobs in February; Strongest Growth Since October 2016; Unemployment Rate remains 4.1%;

Highlights

  • Number of payroll jobs INCREASED 313,000 in February more than double the 154,000 growth in the working age population; Largest jobs gain in 19 months;
  • Prior month job totals REVISED UP net 54,000: UP 36,000 in January to a revised growth of 239,000 jobs (from 200,000) and UP 15,000 in December to a gain of 175,000 (from the last report of a 160,000 increase);
  • Average weekly earnings ROSE $4.06 to $922.88, a 3.1 percent year-year gain UP from December’s 2.7 percent year-year growth;
  • Unemployment rate in February remained at 4.1 percent;
  • Average hourly earnings GREW 4¢, in February a 2.5 percent increase after a 2.7 percent year-year boost in January;
  • Average weekly hours ROSE1 hours in February, to 34.5, reversing a decline in
  • Labor force – GREW 806,000 to 161.9 million as the number of persons NOT in the labor force DROPPED 653,000; labor force Participation rate increase 0.3 percentage points to 63.0 percent, back to where it was last September;
  • Employment-Population ratio also INCREASED 0.3 percentage points to 60,4 percent, matching last
  • Number of construction jobs INCREASED 61,000, with 25,000 new residential construction jobs;
  • Retail sector added 50,300 jobs – largest one-month increase in two years
  • Number of Leisure-hospitality jobs each INCREASED 16,000 in February including 11,500 food service slots;
  • Only industry sector to lose jobs was Information –which includes broadcasting and movie production – which shed 12,000 jobs (including a decline of 9,700 motion picture related jobs;

Trends:

  • The 3.1 percent (year-year) increase in average weekly earnings was the strongest since August 2010 (3.4 percent)
  • Three-month average increase in payroll jobs – 242,000 –was the strongest since June-July-August 2016, 262,000;
  • Number of new entrants to the labor force (as unemployed) was 704,000 in February, most since last April, 707,000
  • Unemployment rate has been at 4.1 percent for the last five months (since October)
  • Gain in construction jobs – 61,000 – was the largest one-month increase since March 2007 – 80,000 jobs;
  • Monthly increase in labor force was largest in more than three years (January 2015); the month-month decline in the number of persons not in the labor force was the largest in 10 years (January 2008, down 6784,000)
  • Unemployment rate for Blacks dropped back to 6.9 percent in February just above the record low of 6.8 percent recorded in December (rate had increased to 7.7 percent in January);

Data Source: Bureau of Labor Statistics

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Perhaps the only bit of “bad” news from the February Employment Situation report is what it will lead to: a faster pace of increases to the target fed funds rate as government by the Federal Open Mark Committee.

Just about every statistical category in the report contained good news, unless you work in the movies, publishing or broadcasting as the information sector showed a 0.4 percent drop in jobs.

But with average weekly hours recovering from a January dip senind average weekly earnings up, the Trump Administration’s economic plan seems to be firing on all cylinders.

Indeed, even the tax code changes may have provided a boost as retail employment rose with the strongest gain in two years.

But all those gains could prove to be illusory.

Middle-class taxpayers could still see their tax bills rise in April 2019 when the full extent of the new tax law kicks in with the elimination of prized tax deductions. The impact of loss those deductions – particularly for state and local taxes — could be magnified as the report indicated government payrolls increased by 26,000 – even accounting for a 7,000 drop in the federal civilian jobs. Local governments added 30,000 jobs and state governments 2,000 – all paid for by state and local taxes.

Perhaps the biggest “downer” of the report was that the strong employment growth was not accompanied by an uptick in wages growth. The month-month increase in average weekly earnings was due not to an increase in wages, but an increase in the average workweek which fell in January due to the weather.

As has been the case the reason for slower growth in earnings in February was the low paying occupations – retail and leisure-hospitality – represented about one of every six new jobs. Higher paying occupations such as utilities (weekly earnings of $1,551.72), mining/logging ($1,302.46), information ($1,121.61) and construction ($1,091.66) accounted for almost the same share of new jobs, so the impact of the better paying jobs was effectively wiped out by the jobs with lower earnings.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

1st Time Unemployment Claims Hit Near 50-Year Low

 By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 210,000 1st time claims for unemployment insurance for the week ended February 24 a DECREASE of 10,000 from the prior week;
  • The number of initial claims for the week ended February 17 was REVISED DOWN 2,000 to 220,000
  • The four-week moving average of first time claims FELL 5,000 to 220,500;
  • Four week moving average represented 0.143 percent of employment, DOWN from 0.146 percent one week earlier;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, for the week ended February 17 was 1,931,000, UP 57,000 from the previous week’s DOWNWARDLY REVISED 1,874,000;
  • The four-week moving average of continuing claims DECLINED 6,250 to 1,920,000;

Data Source: Department of Labor

Trends:

  • The number of initial claims for unemployment insurance dropped to its lowest level since the week ended December 6, 1969 (202,000);
  • The four-week moving average of 1st time claims fell to its lowest level since the period ended December 27, 1969 (219,750);
  • From mid-January to mid-February, initial claims rose 4,000 but the four-week moving average of initial claims fell 18,000;
  • Continued claims have declined 9,000 mid-month to mid-month while the four-week moving average of ongoing claims dropped 750.

 

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The drop in initial claims from mid-January to mid-February reflects fewer layoffs as employers are reluctant to reduce staffing even with a pool of workers available. Whether this is because of a skills mismatch or fears of an impending cyclical change in the economy is difficult to determine.

Of course, one other explanation for the drop in first-time claims could be the Presidents’ Day holiday when offices which would process claims filed by phone or online were closed.

Last month’s Bureau of Labor Statistics Employment Situation report showed a drop in the average workweek to 34.3 hours, the lowest since last March. The drop in weekly hours was one of the few blemishes in the BLS report for January.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

Pending Home Sales Index Plunges in January

Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • National Association of Realtors’ January Pending Home Sales Index (PHSI) fell 4.7 percent from December to 104.6;
  • PHSI for December was revised down from 110.1 to 109.8;
  • December drop was the first since September;
  • Year-year the index was DOWN 1.7 percentage points;

Trends:

  • The December decline was the steepest since the PHSI fell 7.7 percentage points in April 2011;
  • The Index reading is the lowest since January 2015 when the index was at 104.5;
  • Index fell most sharply, 11.8 percentage points, in the Northeast to 87.0. the weakest reading on the region since 81.9 in March 2015.

Data Source: National Association of Realtors (NAR) 

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Just as the new tax law discouraged prospective buyers of new homes, it dropped the hammer on sales of existing single-family homes in January as the National Association of Realtors’ Pending Home sales index which tracks sales contracts of existing homes.

Part of the reason for the decline in the PHSI could be the long decline in the number of homes for sale. According to a separate NAR report on closings, fell from 1.68 million at the beginning of 2017 to 1.46 million in December, a 13 percent drop. (The number of homes for sale increased to 1.52 million in January, still down 9.5 percent in the last year.)

On a year-year comparison basis, the number of homes for sale has fallen for each of the last 32 months.

The decline in home sales left some observers scratching their heads noting the economy appears to be strong with the number of jobs continuing to grow and the unemployment rate continuing to fall.

Earnings growth has not kept pace with job growth however which may be holding some potential home buyers back and builders, despite their growing confidence, have been increasingly focused on multi-family rather than single-family construction.

The NAR index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. According to the NAR, the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. The January PHSI thus suggests another drop in closings in March.

Existing home sales, closings, fell 3.2 percent in January following a 2.8 percent decline in December.

The fall-off in contracts for existing homes paralleled the 7.8 percent decline in new home sales (contracts) in January which came on the heels of a 7.6 percent decline in December.

Muddying the waters, the new Federal Reserve Chair Jerome Powell hinted in Congressional testimony earlier in the week the Federal Open Market Committee may increase interest rates four times this year, not the three increases which had been expected. While the fed funds rate which the FOMC sets is not tied directly to mortgage rates, it does influence them.

The FOMC next meets March 20-21.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

Case Shiller Home Price Index Continued Climbing in December but Could be Peaking

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Case Shiller CoreLogic national Home Price Index IMPROVED in December for the 23rd straight month, increasing 0.2 percent to 196.23;
  • The 10- and 20-city indices each GREW for the 14th straight month; each rose 0.17 percent, the 10-city average to 218.41 and the 20-city average to 204.45;
  • 10- and 20-city year-year index growth was weakest since November 2016;
  • Index ROSE in 13 of the 20 cities surveyed in December;
  • Year-year prices were UP in all 20 cities but the year-year increase slowed in ten cities.

Trends:

  • Index values ROSE in Dallas for the 47th straight month; in Denver values have increased for 24 consecutive months and in both Las Vegas and Los Angeles up for 14 straight months.
  • Values FELL in Chicago and Minnesota for the fourth month in a row and in Boston for the third straight month.

Data Source: S&P Case Schiller/Core Logic

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Home values, measured by the Case Shiller Core Logic Home Price Index continue to rise but how high will they go before dropping? Such a question was once more academic than real but then came 2006 when values in both the 10-city and 20-city indices began to fall. The decline was slow at first but seemed to resemble a cascading snowball until hitting bottom three years later.

The national Case Shiller Index has recovered from its fall and indeed the national index has surpassed its historic high, reached in June 2006, while the 10- and 20-city measures are still trying.

Whether they will make it could be in doubt. The 10-city index is 3.5 percent its 226.29 high and the 20-city index is short of its 206.52 high by just 1.0 percent.

The threat, of course, comes from changes to the tax code which capped some of the tax advantages to homeownership.

We’ve seen both the measures of new and existing home sales fall even before the new tax code took effect

The signs for the overall index are ominous.

Prices fell in December in two regions the county, the Northeast and the Midwest and were up only 0.1 percent in the South. Prices rose 0.5 percent in the West. Eight of the 20 cities in the Case-Shiller survey are in the West, led by Las Vegas and Los Angeles where prices rose 0.8 percent and 0.7 percent respectively in December.

According to the National Association of Realtors, the median price of an existing single-family home fell $700 or 0.3 percent in December. The median price of an existing single-family home in the Northeast dropped $11,700 or 4.3 percent, fell $2,800 or 1.4 percent in the Midwest and dropped $500 or 0.1 percent in the West. The median price of an existing single-family home rose $2,300 or 1.1 percent in the South in December according to the NAR.

Prices nationally fell sharply in January according to the NAR which could mean a drop in the Case-Shiller Index.

Hear Mark Lieberman this Friday on P.O.T.U.S. radio’s Morning Briefing, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

New Home Sales Plunge in January

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales FELL 7.8 percent in January to 593,000 (seasonally Adjusted Annual Rate);
  • Unsold inventory ROSE 2.4 percent or 7,000 to 301,000
  • Median price of a new home DROPPED $13,700 from December to $323,000;
  • Year-year the median price of a new home was up $25,000 (2.5 percent)

Trends:

  • The pace of sales has fallen 14.4 percent ((percentage) in the last two months, steepest two-month decline since summer 2013;
  • The SAAR of new home sales has fallen month-month in five of the last seven months, but remains up year-year;
  • The inventory of unsold homes is at its highest level since March 2009 (311,000) the depth of the Great Recession;
  • The increase in the inventory of unsold homes rose for the was the steepest one-month climb since April 2006;
  • The dollar drop in the median price of a new single-family home was the largest in a year.

Data Source: Census Bureau and Department of Housing and Urban Development

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Despite continued confidence among builders, the sales pace of new single-family homes dropped again in February, by more than seven percent for the second straight month.

The decline in new home sales – contracts for new homes—may well have been expected as consumers, staggering under debt from holiday shopping might have been reluctant to take on new obligations. Indeed, contracts for the purchase of new homes have declined in six of the last 10 January reports.

This year may have been different because this was the first January in more than 30 years to be affected by a new tax law. And, the law which was signed by President Trump last December caps mortgage interest and property tax deductions reducing some of the tax benefits of homeownership. And, with the Federal Reserve keeping a watchful eye on payroll data, there is a strong likelihood the Federal Reserve will raise the benchmark fed funds rate when it meets next month to try to slow the economy before it gets too hot,

While the fed funds rate is not tied directly to mortgage rates, it does influence the cost of a home loan, more the updraft

The recent boot in jobs has not been accompanied by an increase in wages though take-home pay began to go up in February

The HUD-Census report o new home sales followed the report last week by the National Association of Realtors (NAR) that existing home sales fell in January for the second straight month. The NAR report covered closings of transactions entered into in November or December.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

1st Time Unemployment Claims Edge Down as Continued Claims Again Drop

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 222,000 1st time claims for unemployment insurance for the week ended February 17, a DECREASE of 7,000 from the prior week;
  • The number of initial claims for the week ended February 10 was REVISED DOWN 1,000 to 229,000
  • The four-week moving average of first time claims DECREASED 2,250 to 226,000;
  • Four week moving average represented 0.147 percent of employment, DOWN from 0.148 percent one week earlier;
  • The number of continued claims –individuals who have been collecting unemployment insurance, reported on a one-week lag – for the week ended February 10 was 1,875,000, DOWN 73,000 from the previous week’s UPWARDLY REVISED 1,942,000;
  • The four-week moving average of continuing claims DECLINED 16,250 to 1,926,500;

Data Source: Department of Labor 

Trends

  • Since mid-January, the four-week moving average of first time unemployment insurance claims is down 17,500, the largest mid-month to mid-month decline since October;
  • Continued claims have decline year-year for 422 straight weeks, more than eight years!

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Another week, another solid report on unemployment insurance claims. While the number of first time claims is positive news, the ongoing decline in the number of continued claims speaks volumes about the strength of the labor market.

Though the drop in continued claims has been irregular, the trend is clearly downward since continued claims peaked at 6,628,000 in May 2009, arguably one of the more difficult times to get a job during the Great Recession. Since then, the milestones have been frequent: under six million in September 2009, under five million just three months later, under four million in January 2011, under three million in May 2013 and under two million last April.

The steady decline to be sure threatens to make the labor market even tighter which could slow the level of job creation. We’re already seeing the signs. Monthly job creation averaged 176,000 in the last 12 months, down about 15 percent from the previous 12 months.

One consequence of the tighter labor market we’ve yet to see is a general increase in wages. While hourly earnings rose in January at a 2.8 percent year-year rate – up from 2.6 percent in December—hourly earnings were up at 1 2.5 percent year-year rate, down from 2.9 percent in December as the average workweek fell back to 34.3 hours. Typically, an increasing workweek underscores the need for more workers while a declining workweek suggest just the opposite.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

January Home Sales Drop Sharply for Second Straight Month

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales – closed sales — FELL sharply in January: down 3.2 percent to a seasonally adjusted annual sales rate of 5.38 million after a 2.8 percent drop in December
  • The December sales rate was REVISED DOWN 10,000 to 5.56 million;
  • Median price of an existing single-family home DIPPED 6.4 percent or $6,000 – the steepest one-month decline in two years;
  • Year-year the median price is up 5.8 percent or $13,200;
  • Number of homes available for sale ROSE 60,000 or 4.1 percent to 1.52 million;
  • The months’ supply of homes for sale in January ROSE to 3.4 – the first increase since last May

Trends:

  • Over the last two months, sales of existing single-family homes have dropped almost six percent, the largest two0-month decline since October-November 2015 when sales fell 10.7 percent;
  • The year-year decline in sales — 5.4 percent – was the largest since August 2014 when the 12-month decline was 7.2 percent;
  • The sales drop came even though the Pending Home Sales Index – measuring contracts for sale – was up for the second straight month;
  • The median price of an existing home has fallen month-month for six of the last seven months; the January price drop was the largest one-month price decline since September 2015;
  • The increase in the number of homes for sale ended a string of seven straight monthly DECLINES.

Data Source: National Association of Realtors: (NAR):

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The new tax code was expected to have an impact on homeownership and the January report on home sales (closings) suggests those concerns may have been realized sooner. That said, the inventory of homes on the market increased which could boost future sales but that increase in homes for sale could also be from homeowners who see the benefits of owning a home fading.

To be sure, one month – or in this case two months — may not signify a trend but it sure looks as if builder Donald Trump may have been a bit short-sighted.

Buyer traffic, according to the NAR improved in January but that may not have been because of interest in actually buying. Realtors know that the Sunday after Thanksgiving is a strong day for open houses. After being cooped up with football and turkey and relatives, “window-shopping” for a new home may be just the cure for home-bound boredom. The same goes for cold weather which keeps people in their apartments or homes.

Indeed, we won’t know for a while just how much of an impact the limit on home mortgage interest will have on transactions, but the advance report certainly isn’t favorable.

Hear Mark Lieberman every Friday, on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

New January Housing Permits Hit Highest Level Since June 2007, Led by Multi-Family

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing permit filings in January IMPROVED 7.4 percent to a seasonally adjusted annual rate (SAAR) of 1.396 million units;
  • The rate of permits for single-family home starts in JANUARY declined 1.7 percent to an SAAR of 866,000 units;
  • The rate of permits for multi-family homes rose 26.5 percent in JANUARY to 530,000 units (SAAR);
  • The rate of all housing starts ROSE 9.7 percent in JANUARY to an SAAR of 1.33 million;
  • Single-family starts ROSE 3.7 percent to an SAAR of 877,000 while multi-family starts SOARED 23.7 percent to an SAAR of 449,000;
  • The rate of home completions in December INCREASED 2.2 percent from November; Single-family completions GREW 4.3 percent while multi-family homes declined

Trends:

  • The pace of all permits rose to the highest level since June 2007 (1.41 million)
  • Single-family permits represented 62.0 percent of all permits, the lowest share since October 2016 (60.6 percent).
  • Total starts reached the highest level since October 2016 (1.328 million)
  • Multi-family housing starts rose to the highest level since January 2017 (460,000)

Data Source: Census Bureau and Department of Housing and Urban Development 

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A surge in multi-family permits drove new housing permit to the highest level in over a decade as developers responded to the habits of millennials who appear to be shunning single-family homes.

While the sharp increase in permits is welcome news for home builders whose housing market index (HMI) remained at a lofty 72 this month, according to the National Association of Home Builders which creates the index. One of the components of the index, measuring current home buying activity, reached its highest level since June 2005.

While the national homeownership rate rose to 64.2 percent in the fourth quarter – highest in more than three years – the homeownership among the under 35 age cohort, once as high as 42.8 percent, was 36.0 percent at the end of last year

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

1st Time Unemployment Claims Edge Up but Remain Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 230,000 1st time claims for unemployment insurance for the week ended February 10, an INCREASE of 7,000 from the prior week;
  • The number of initial claims for the week ended February 3 was REVISED UP 7,000 to 223,000
  • The four-week moving average of first time claims INCREASED 3,500 to 228,500;
  • Four week moving average represented 0.148 percent of employment, UP from 0.146 percent one week earlier;
  • The number of continued claims –individuals who have been collecting unemployment insurance, reported on a one-week lag – for the week ended February 3 was 1,942,000, UP 15,000 from the previous week’s UPWARDLY REVISED 1,927,000;
  • The four-week moving average of continuing claims DECLINED 5,750 to 1,941,150;

Data Source: Department of Labor 

Trends

  • Since the beginning of the year, the four-week moving average of initial claims for unemployment insurance has dropped 22,250. A drop of almost 9 percent;
  • Year-year the improvement in the four-week moving average is 6.7 percent, underscoring the long-term tightening in the labor market;

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The unemployment picture continues to stabilize as the year matures and holidays are in the rear-view mirror (next week’s Presidents’ Day observance notwithstanding). The picture has been one of steady improvement with fewer businesses shedding workers.

Inevitably, this should lead to wage increases as employers struggle to retain workers. The downside, of course is that higher wages can lead to increased inflation, which the Federal Reserve attempts to keep in check.

Forecasting inflation is a perilous chore; if the Fed steps too hard on the brakes it can bring the economy to a screeching halt with inevitable consequences. Wednesday’s Consumer Price Index report showed a 0.5 percent jump in prices in January, the largest since September and a 2.1 percent annual inflation rate, the sixth straight month CPI inflation has matched or exceeded the Fed’s 2.0 percent target.

The economy’s performance supports the view the Federal Open Market Committee will continue and perhaps accelerate its planned interest rate increases.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.