Markets react positively to Fed rate announcement and jobs report

The government shutdown dominated the news in January. Many economic reports were delayed, including the preliminary report of economic growth for the fourth quarter. But important events did occur last week, including the Federal Reserve Board announcement after their meeting and the jobs report release for January. Analysts were wondering whether the shutdown would affect the employment data -- even if furloughed workers did not count as unemployed. 

How did the data turn out? The Fed did not raise rates, but this was expected. More importantly, its announcement indicated that it is flexible regarding future rate increases. The markets have been counting on this flexibility, as long-term rates have fallen over the last several weeks. The statement was even better than expected, as the Fed removed language regarding "gradual rate increases" in favor of a wait-and-see approach.

The jobs report on Friday showed growth of 304,000 jobs. Coming during the shutdown period and after a very strong report in December (though December's numbers were revised down by 90,000), this report was seen as stronger than expected. Unemployment ticked up to 4.0%, indicative of more Americans entering the work force -- a possible effect of the shutdown. Wages grew 3.2% month-to-month, on par with previous readings. One anomaly, part-time workers looking for full-time work soared, which may have been another effect of the shutdown. All told, it was an interesting week and the markets reacted positively to the news, though rates and oil prices rose after the jobs report was released.