Sam McElroy - Should the Fed Go or Should it Stay? #4245

As Sam writes, the U.S. economy is fundamentally strong — for now
Federal Reserve Board Chairman Jerome Powell explains the Fed’s new patient policy.

With the shutdown ended, President Donald Trump’s erratic behavior isn’t killing us. For now. January was a month of bad economic news when there was any news at all (i.e. when data wasn’t delayed because of the government shutdown) — until Wednesday.

Then we found out from payroll processor ADP that private employers added 213,000 jobs this month. Hours later, the Federal Reserve, spooked enough by the tumult over the shutdown and the manifest nuttiness emanating from the White House and the shutdown, said it was out of the business of raising interest rates for a while.

And stocks zoomed, with the Dow Jones Industrial Average DJIA, -0.64% s rising 435 points and the Standard & Poor’s 500 SPX, +0.02% tacking on 1.6%.

Also read: How a dovish Fed sparked a stock-market rally and tanked the U.S. dollar

Has the Orange Combover morphed into Goldilocks? Hmmm.

More like, we’re getting a reminder that fundamentals matter more than politics. Right now, the fundamentals are still pretty good — the Congressional Budget Office estimates the shutdown cost the economy a modest $11 billion (it’s a $20 trillion a year economy), and $8 billion of it will be made up as federal workers get back pay. Employers are still hiring.

Not everything is perfect — there was a very weak report on existing-home sales from the National Association of Realtors, and business and consumer confidence surveys are weakening.

But with the shutdown ended, President Donald Trump’s erratic behavior isn’t killing us. For now.

So what happens next?