February Jobs Report Shows Fed Must Act Aggressively

Inflation will skyrocket if the Federal Reserve does not raise interest rates by at least 50 basis points next week.

Recently released data indicates that the US economy added 678,000 jobs in February. That strong number would be great news if it occurred in an economy with stable prices. But considering the inflation rate is about to jump to double digit levels, the jobs report is signaling an overheated economy.

In January, 467,000 jobs were added and the numbers for the prior two months were revised upward. That should be great news because numbers that high indicate that the economy is growing much faster than previously thought.

Thursday's CPI to Be Another Shock

The consensus view from economists seems to be that the economy is currently growing at less than a 3% rate. However, for that many jobs to be filled in two months, the economy must be growing much faster. The first official estimate for gross domestic product (GDP) growth in the first quarter won’t be available until the end of April.

Other data also seems to be pointing to faster growth. That’s good as long as we have growth with price stability. Unfortunately, we have the worst inflation in 40 years. And it is about to get even worse. The Consumer Price Index (CPI) for this month will…