It's Jobs Day. Whatever the Market Says, Fed's Still Bullish on Economy

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It's been a busy week for economic data and Federal Reserve speakers. As we cap it off with jobs and wages on Friday, the picture hasn't changed much.

The Fed's preferred inflation gauge, which strips out volatile food and energy costs, slowed a little but is still too high. But consumer spending, also included in the PCE report, was the strongest since June in October and personal incomes are still rising. That's a bullish signal for the central bank.

Fed Chairman Jerome Powell on Wednesday signaled that he's comfortable with a smaller interest-rate increase this month than the run of 0.75 point jumbo moves we've seen this year. But a half point is still pretty big, by the standards of the past few decades.

And the reasons Powell gave for the slight shift have little to do with signs of economic weakness. He's more concerned with fine tuning and allowing the hikes that have been made so far to take effect, knowing that monetary policy works with a considerable lag.

Adding former adviser to the Obama administration Austan Goolsbee as a voting Fed member next year doesn't say much about the outlook for rates, either. Goolsbee said just last week that inflation isn't slowing as quickly as desired.

For now, the economy is still humming along. Averting a rail strike will further reduce the chance that growth will, pardon the expression, veer off track.

To sum up, rate hikes may come in smaller packages now. But it's still way too early to expect a pivot to cuts. Powell and this week's data have made it clear that rates going higher for longer is the order of the day.

-- Brian Swint