Reports may put interest-rate hikes on hold

Summer is typically the season for extended vacations, but theMarch jobs report solidifies the case for the Federal Reserve tostart now on a long monetary policy holiday.

By broadly reinforcing the view that the nascent economic recoveryis just a few notches above feeble, the March unemployment data tellthe Fed that it probably will be quite a while before the centralbankers can justify raising interest rates.

One of the biggest guessing games on Wall Street has been when theFed would start inching rates back up. Right now, the overnightfederal funds rate stands at a dramatically low 1.75 percent.

Those who figured rates would go up sooner rather than laterpointed, among other things, to the perception that the post-Sept. 11rate cuts were done more to reassure markets than for moretraditional economic motives.

Therefore, this thinking goes, some at the Fed would be happy tostart reversing the rate trend and start pushing them back up. Butafter Friday's release of March jobless data, any policy makers eagerto raise rates will clearly have to restrain themselves.

This lack of action probably will last throughout the summer inorder to give the economy time to really get its legs back underoptimal low-rate conditions.

The March data show 58,000 jobs were added in March, which markedthe end of a seven-month string of job losses. (The string appearedto be broken in February, but on Friday the Labor Department revisedwhat it first said was a 66,000 job gain to a 2,000 job loss.)Meanwhile, in March, the unemployment rate climbed to a surprising5.7 percent.

Economists will tell worriers that employment is a laggingindicator, and even within the March report there are signs ofrelative strength to be found. In manufacturing, for instance, thenumber of jobs decreased in March, but fewer were lost than inprevious months.

No matter how you read it, the March jobs report does not raiseany fears that the economy is running faster than is healthy for thelong term.

Average hourly earnings crept up to $14.67 from $14.63, so thereis no fuel from the key wage component of inflation.

Meanwhile, the outsized recent increases in energy costs forAmericans are enough to provide more than enough restraint on therecovery.

To the degree that having to pay more at the gas pump inhibitsAmericans' ability to spend on other items, climbing energy costs puta crimp in a recovery that is still waiting for corporate America toget off the mat and make its own contribution to growth.

Energy prices are yet another reason to keep the Fed from raisingrates.

So what should the central bank do during this lengthy period whenrates should be left alone? Well, Fed Chairman Alan Greenspan hasalready shown himself adept at getting enmeshed in the importantdebates over better corporate governance and accounting. And the newarrivals among the Fed governors should appreciate the time to getacclimated. And the weather should be starting to get warmer ...

Dow Jones/AP