The 142,000 new jobs added to the economy in September undershot analyst expectations of something in the 200,000 area by a long way.
In light of this, it is fair to ask whether we can now safely disregard Federal Reserve chair Janet Yellen’s strong steer issued only a week ago that the first raise will come through by the year end.
The problem this raises is not so much the immediate upheaval for everybody from economists to asset allocators to retail investors with a few thousand in an ISA, who all may now feel they have to once again tweak their forecasts or portfolios.
The issue is the long term credibility of the Fed’s rhetoric, and Yellen’s in particular.
For many months the Federal Reserve steered markets towards a September rate rise being the plan, only to famously call it off more or less at the last minute, due to the big slide in Chinese markets and related fallout.
Having decided to nail her colours to the mast of a rise before 2015 is behind us, backing off from this guidance so soon after the last about turn would run the risk of being the final straw in terms of attaching any weight to public commentary coming from Yellen.
The big danger in this is that the press conference has become a key weapon in the armoury of central bankers. The Bank of England’s Mark Carney has made an art-form of this particular tightrope walk, while his European Central Bank counterpart Mario Draghi was able to go a long way to staving off the first incarnation of the euro crisis when he uttered his ‘whatever it takes’ line.
