But sometimes bad news can have silver linings. For RPBG members, the best news about a possibly slowing economy is that it gives the Fed an excuse to delay raising interest rates. Just a week ago, this seemed like something that was going to happen sooner rather than later. It’s always dangerous being too sure you can predict what the Fed will do next, but the poor jobs report certainly gives them cover to delay raising rates if, indeed, that is what they want to do. 

We don’t know for sure what the Fed will do next, but we do know that the debate within the Fed about when, and how much, to raise rates has been a hot topic as the underlying economy has gotten stronger. In one camp, you have the inflation fighters who fear low rates left unchecked will inevitably lead to increased prices and, possibly, run-away inflation. In the other camp, you have Janet Yellen and (apparently) a majority of Fed committee members who believe inflation is still sufficiently under control with little evidence of a surge in prices, particularly wages which remain fairly stagnant, despite the recent string of good jobs reports.

This latest jobs report gives the rate-doves another excuse to hold off on a rate increase. If inflation was tame when jobs were expanding at 200,000 per month, the argument goes, why should we jump to increase rates if job growth is starting to slow down again?

The equities markets reacted to the jobs report with caution. While there was some relief that the Fed might back off on rate increases, there was also recognition that the economy appears to be slowing down again. The Dow, which had pushed back above 18,000, closed Thursday at 17,762, the day before the Bureau of Labor Statistics announced the March jobs results.  When the jobs numbers were announced Friday morning, equities markets fell everywhere except the United States where the markets were closed in observance of the Easter holiday.  The Dow opened Monday morning at 17,662, 100 points below Thursday’s close but quickly rallied to close the day at 17,880. This rally was certainly due, in part, to the conviction that the Fed would hold off on raising rates.

So, once again, we seem to be in the sweet spot of just enough growth to keep the economy heading in the right direction, but not so much or so fast that the Fed feels under a lot of pressure to kill the fun by increasing rates. How long this can last is anybody’s guess, but I don’t think anyone will complain as long as it does.