Benzinga Asks LPL Economist: When Will Fed Raise Rates?

Benzinga recently had a chance to speak with John Canally, Senior Vice President and Economist at LPL Financial, about the current state of the U.S. economy following the disappointing March jobs report. Among the topics Canally covered was his prediction of when the Federal Reserve is likely to make its first interest rate hike. Disappointing numbers The March nonfarm payroll growth number released by the Labor Department last week was 126,000, well short of consensus expectations. However, Canally told Benzinga that there is more to the disappointing number than first meets the eye. "It was a clunker, that's for sure. There's no one explanation that would explain all of it. Some of it was the weather, part of it was probably the port strike, but I think a lot of it was the stronger dollar and the oil capex," Canally explained. Is the March number a sign of bad things to come for the U.S. economy? Despite the disappointing March number, Canally was quick to point out that labor market numbers typically lag the rest of the economy. He sees the latest job numbers as more of a reflection of what was happening in the first quarter rather than an indication of things to come. Canally's advice that investors should "take it with a grain of salt" seems to also be the consensus among stock market investors as well. The S&P 500 is trading up 19 points on Monday following the report. Rate hike delayed? One of the reasons for the positive market reaction is likely the growing belief that the Federal Reserve's first rate hike is no longer imminent. Coming into 2015, consensus predictions were that the Fed's first interest rate move would be coming in June. Canally believes that this most recent jobs report will now make it "very difficult" for the Fed to raise rates in June. Canally and LPL Financial had been calling for the first rate hike to come in "late 2015" (November or December) long before the March jobs report. When Benzinga asked if the new report had altered that position, Canally answered, "It didn't really change our view, but I think what it did is push consensus closer to our view."