BLOOMY FEBRUARY

Strong jobs report makes Fed rate hike more likely

THE Trump administration gets to brag — and the Federal Reserve gets to raise interest rates next week.

And everyone who has adjustable rate debt — from mortgages to credit cards to home equity loans — should prepare to pay more.

All of those developments will happen because the Labor Department on Friday announced a way betterthan-expected 235,000 new jobs were created in February.

The unemployment rate fell to 4.7 from 4.8, hourly wage increases got larger (6 cents) compared with January (4 cents), more idle working-age folks, encouraged by President Trump’s policies, started looking for work, and the percentage of underemployed took a step down — to 9.2 percent from 9.8 percent.

And if that were all there was to Labor’s report, I could stop here, and you could doodle in the rest of the space. But it isn’t.

There’s a lot going on under and around those employment numbers that will make life very interesting over the next few months.

Let’s start with the numbers themselves. First, that 235,000 job figure was, as always, after the government applied seasonal adjustments. The raw numbers show 1.010 million jobs were created in February — which just happened to be Trump’s first full month in office.

February’s real job growth looks even better when you compare it with January’s pre-adjusted result: a loss of around 3 million jobs.

The White House was quick to take credit. Gary

Cohn, fresh out of Goldman Sachs and now the director of Trump’s National Economic Council, said on CNBC right after the release of the figures: “This number reaffirms everything that we’re trying to do.” Did it? Could be. Trump’s dogged effort to force companies to keep jobs in America and create new ones could be paying off, although it would be miraculous if he was having any effect this soon.

The mild weather across the country probably was a bigger factor. Construction jobs grew at the fastest pace in 10 years.

But the US economy is still not hitting on all eight.

The Atlanta Federal Reserve has the US economy weakening in the first quarter of 2017, to a 1.2 percent annual growth rate.

So there’s a legitimate question as to why employment would be growing at the time when the economy is stalling from levels that weren’t good to begin with.

That gets me to the Federal Reserve, which messed up by not raising interest rates to more normal levels over the past eight years.

That, as I’ve said many times, created a secret tax on savers, who were denied interest income.

But more important, it took away the Fed’s ability to fight an economy that could begin to contract instead of very slowly expand.

Put another way, the Fed needs to raise rates now so it can reduce them later when the economy needs a boost.

A rate hike could send Trump right back to his Twitter machine as it could slow the economy.

Higher interest rates aren’t good for stocks. For one thing, companies will pay more to borrow money, and that will hurt earnings. And corporate profits, as I’ve said, are already too low compared to stock prices.

But just as important is the fact that higher rates will eventually make safe, fixedrate investments more attractive to people who are nervous about stocks.

Wall Street could be getting nervous about how often the Fed will raise rates this year. Stocks seesawed back and forth between gains and losses on Friday — before closing up 45 points, at 20.903.

And if Wall Street is nervous, you should be too.