NFP: Likely Improvement May Lead to End of QE, ZIRP

By the numbers: Consensus for monthly BLS payroll data are gains in the 200k level (survey forecasts 100,000 to 297,000). This follows an increase of 36,000 workers in January, with many blaming winter storms for depressing hiring. Expectations are for Unemployment to tick up from 9% to to 9.1% as more job seekers enter the labor market.

Let’s consider what this might mean to markets: If we start seeing consistently larger sustained payroll gains, that might lead to the end of QE and ZIRP.  (See Fed Policy Makers Signal Abrupt End to Bond Purchases in June). Note that this would be good for the economy and the US Dollar, but likely cause a hiccup in equity markets, which have been extremely sensitive (is dependent a better word?) to Fed liquidity.

The key question is whether the end of ZIRP can occur as the economy develops a self sustaining organic expansion — and not, as was discussed earlier this week, as a “national economy on performance-enhancing drugs.”

What happens when the dope gets taken away is now anyone’s guess. And that is the phase we are in — hypothesizing whether (or at least when) the economy can stand on its own.

This is, in no small way, a substantial improvement from not too long ago, when we were guessing when the world would collapse, and the more extreme societal elements were stockpiling bottled water, dehydrated food, and ammo.

Be thankful for the little things . . .


BLS data released at 8:30am

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