Economy Watch: No Hint of Rate Hike Later This Month

Predicting the decisions of the Federal Reserve is something of a mug's game, but that doesn't stop economists.

Predicting the decisions of the Federal Reserve is something of a mug’s game, but that doesn’t stop economists, pundits or bloggers from trying. After Fed Chair Janet Yellen make a speech at the World Affairs Council of Philadelphia on Monday, the first one after the sluggish May jobs report from the BLS last week, observers listened for hints of a rate hike one way or the other. In recent weeks, the conventional wisdom has tended toward a hike this month.

Yellen didn’t seem to hint one way or the other, which is now taken to suggest that June is off the table for a rate hike, a circumstance that will keep the cost of money for CRE projects low. The central banker said: “[T]he overall labor market situation has been quite positive. In that context, this past Friday’s labor market report was disappointing.

“And while the unemployment rate was reported to have fallen further in May, that decline occurred not because more people had jobs but because fewer people reported that they were actively seeking work.” Yellen cited BLS metrics besides the headline numbers, but they weren’t especially encouraging, either. A broader measure of labor market slack that includes workers marginally attached to the workforce and those working part-time who would prefer full-time work was unchanged.

“An encouraging aspect of the report, however, was that average hourly earnings for all employees in the nonfarm private sector increased 2.5 percent over the past 12 months—a bit faster than in recent years and a welcome indication that wage growth may finally be picking up,” Yellen said.

She also stressed that although this recent labor market report was “concerning, let me emphasize that one should never attach too much significance to any single monthly report.” Other indicators from the labor market have been more positive, the chair asserted. So the Fed might still be optimistic, but maybe not optimistic enough to pull the trigger on higher rates this month.