There is likely enough to like in Friday’s jobs report to keep the Federal Reserve on track to scale back its monthly bond buying by another $10 billion to $55 billion at its March 18-19 policy meeting.
Fed officials have made clear in the past few weeks that their bar to veering from this course is high. It’s a point that New York Fed President William Dudley emphasized in an interview with The Wall Street Journal Thursday. He said his “threshold is pretty high” to altering the plan. Moreover, Mr. Dudley, Fed Chairwoman Janet Yellen and other Fed officials believe economic data have been soft in recent months because of bad weather. Employment in the retail industry, for example, has now fallen for two straight months. Against that backdrop, a 175,000 increase in payrolls in February probably doesn’t look that bad. Mr. Dudley said he believed the economy is growing at an annual rate below 2% in the first quarter because of bad weather, but is likely to bounce back to a 3% pace in the spring.
A more challenging question for the Fed at its next meeting is whether to change its forward guidance on the likely future course of interest rates. The Fed has said it won’t even consider raising rates until the jobless rate gets to 6.5%. Mr. Dudley said Thursday he thought the Fed should revise the guidance with the jobless rate so close to 6.5%. It was 6.6% in January. With it rising to 6.7% in February, that takes a little pressure off officials to move right away. More on that later.