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U.S. Job Numbers: How Will The Fed React Next Week?

This morning the U.S. Labor Departmentreleased its November jobs report. The data showed a bigger jump in payrolls, a slight increase in unemployment and tamer than expected wage inflation. So what will the Fed do with this information? They meet next week. CNBC’s Mark Haines explored the possibilities with Stephen Gallagher – the Chief U.S. Economist at Societe Generale and David Greenlaw – the Chief U.S. Economist at Morgan Stanley on “Morning Call.”

Gallagher said it reinforces the message from the Fed that the economy is healthy, it's experiencing moderate growth and inflation is the bigger risk going forward. Essentially there’s no change in Fed thinking. Gallagher subscribes to the soft landing scenario, but says we won’t always be at this stage. He says in the first part of 2007-- soft landing is the right story and later in 2007--he’s looking for acceleration.

David Greenlaw agrees and says The Fed will retain its tightening bias – but they won’t be hiking rates anytime soon. They will recognize the downshift in growth which suggests going forward core inflation pressure might abate, gradually. He doesn’t see Fed easing rates, any time soon.