There’s more than a week to go before the Fed’s next scheduled FOMC meeting on March 18, but judging by the February employment report released this morning the odds of another rate cut look virtually assured.
Payroll employment slumped by 63,000 last month, the Labor Department reported today. That’s the second monthly decline and the steepest in nearly five years. Perhaps the economy’s capacity for minting new jobs is set to rebound, but it doesn’t look that way. As our chart below suggests, cyclical downturns have been known to run for a while, suggesting that at this moment it’s premature to think that the economy has now purged itself of excess.
Yes, the previous downturn was extraordinary in some ways and so perhaps the recent past isn’t necessarily prologue this time around. The hope is that the current slump will be short and mild, but as always there’s no guarantee. In fact, there are more than a few reasons to think that we may be in store for something more than a brief rough patch. For example, mortgage foreclosures jumped to an all-time high at last year’s close, the Mortgage Bankers Association reported yesterday. Meanwhile, home equity dropped under 50% for the first time since World War II in last year’s fourth quarter, according to the Federal Reserve.