Due to negative in December and February, the Federal Open Market Committee () may be more inclined to cut key at its March meeting. Specifically, the Labor Department reported on Friday that there were 92,000 payroll jobs lost in February, which was a massive surprise, since economists expected 55,000 payroll jobs to be created. Payrolls have declined in two of the past three months. In fact, payrolls have declined in five of the past nine months. The severe winter weather curtailed construction jobs in February, plus there was a strike by Kaiser healthcare workers (28,000 healthcare jobs disappeared).
The other big news on Friday was that the Commerce Department said that declined 0.2% in January. Excluding autos and gasoline sales, retail sales rose 0.3%. Seven of the 13 categories surveyed declined in January. So, retail sales continue to sputter and may help convince the Fed to cut key interest rates.
Speaking of the Fed, Minneapolis Fed President Neel Kashkari said that one or two key interest rate cuts would be appropriate this year if inflation cools, but added that the war in the Middle East would justify an extended pause. Kashkari also described the labor market as steady to soft. So clearly, Kashkari is open to further key interest rate cuts, but it would have to be triggered by weak payroll data and/or favorable inflation data.
Speaking of inflation, war-related inflation has emerged since the Strait of Hormuz is now closed for shipping, and the price of shipping is rising as routes get longer and insurance costs rise. The U.S. energy industry is emerging as a winner from the military action against Iran. Qatar suspended its LNG exports for the first time in 30 years, so the U.S. dominance over LNG exports will likely increase. Brent crude oil prices rose over $80 per barrel, and WTI crude oil prices have also surged, so many U.S. energy companies will likely reap windfall profits as Iran attacks energy infrastructure in Qatar and Saudi Arabia.
