Woo-hoo, let’s hop aboard Fed roller coaster

I T’S

going to be a wild ride. The Federal Reserve is expected to hop aboard a roller coaster next week by raising interest rates for the first time in seven years. But what happens next?

As I mentioned in my last column, the US economy — not to mention the world economy — isn’t ablaze. Ours is growing at a miserable 2 percent a year, while others are doing a lot worse.

And if the commodities market is the soothsayer it has always been, economic growth has a better chance of declining than improving. Oil isn’t in a free fall for nothing: Investors believe that demand will decline because of weak business conditions around the world.

But forget all that. None of that’s any fun.

People get their jollies on roller coasters because of the steep dips and high climbs. And that’s what US economic statistics are likely to provide from now until spring.

So I’m going to offer some guesses. If I’m right, make sure to congratulate me in a few months. If I’m wrong, well, nobody is perfect.

The figures for December job growth, which will come out on Jan. 8, will likely show enough weakness that people will secondguess the Fed’s expected rate hike.

December is one of those months when the Labor Department doesn’t make generous assumptions about the number of jobs being created by newly formed — or “born,” as it calls them — companies. In fact, in December the Labor Department subtracts jobs because it thinks there are more companies dying than being born.

But December brings another problem. Hiring in the retail business has been running 5 percent below last year and is at a fouryear low, according to the research firm Challenger, Gray & Christmas.

That in itself should hurt the December employment number. And it will also throw off the seasonal adjustments that hinge on stronger growth.

But January’s employment statistics, which will come out on Feb. 5, are the ones to really watch. Over the past six years, the Labor Department has reported four absolutely terrible figures for the first month of the year — a gain of only 113,000 jobs in 2014, a puny increase of 36,000 in 2011, a loss of 20,000 in 2010, and a drop of 598,000 during the recession in 2009.

January 2015 saw a good increase of 257,000 jobs, and there was a sizable gain of 243,000 in January 2012.

But the odds are still against January being a good month. There’s a reason. The Labor Department subtracts a huge number of jobs in January on the assumption that lots of companies go kaput after the holidays.

So January has a good chance of being shockingly bad. And that will put the Fed back on its heels and will make a second rate hike, which is already being forecast by many for spring, impossible.

But there’s something else that will come out on Feb. 5 along with the January job figures. The Labor Department calls it a “benchmark revision” — a correction of all the numbers.

Wall Street ignores this figure, but it gives the most honest portrayal of the job market. A couple of months ago, the Labor Department said it overstated job growth by 208,000 from March 2014 to March 2015.

That 208,000 figure was prelimi nary; the final revision comes on Feb. 5. If that revision is big enough, it could cause people to pay attention — and that will also get them nervous.

But then things statistically change for the better.

The Labor Department will start making very generous assumptions about new job growth starting in April. The job market will look better because of this, and the “experts” will start calling for another rate hike depending on their inclination. By June, the ratehike advocates should be in full voice.

There are lots other data that will come out during this period. But the ones that get the most attention are the gross domestic product figures compiled by the Commerce Department.

The GDP in the first quarter could be a real shocker. To understand why, you need to know a little about seasonal adjustments, the other little statistical trick that makes data go up and down magically.

The seasonal adjustments used by the government look backward five years to see what is normal for a particular period of a year. So the adjustment used for the GDP will consider that last year’s first quarter growth was only an annualized 0.6 percent, and the first quarter in 2010 fell by 0.9 percent.

Both first quarters, you might remember, were affected by unusually cold and snowy weather. You have to go back to the first quarter of 2013 to see what was probably normal annual growth of 1.9 percent.

So those in the government’s seasonal adjustment program will be tricked into thinking that 0.6 percent growth and a 0.9 percent decline are normal for the January through March season. If the weather happens to be better in early 2016, a more normal period of growth could end up looking much better in the government statistics than it is in reality. If this happens, there will be howling for another rate hike even if the employment figures are crappy.

So those are my predictions. If there is a stock market crash or a major terrorism attack or if Donald Trump actually looks like he might win, I take it all back.

Then we aren’t on a roller coaster — we are on a plane in a nosedive.