Fed May See Unemployment Risk in Deteriorating Confidence: Chart

% of consumers reporting
% of consumers reporting "bad" business conditions versus the unemployment rate

The mostly positive stretch of employment statistics in recent months may give way to concerns over the labor market when Federal Reserve policy makers meet next in March.

Data released by the Conference Board Tuesday showed almost 20 percent of U.S. consumers surveyed this month said business conditions were “bad,” the most since November 2014. Over the last 30 years, this question has had the most predictive power for forecasting the unemployment rate over the following three months, based on data compiled by Bloomberg.

In September, the Fed passed on raising interest rates as six of the 17 officials on the rate-setting Federal Open Market Committee said risks to their unemployment rate forecasts were skewed to the upside -- up from two in the previous round of projections submitted in June.

That number fell back to two in December, justifying a rate increase. If the next round of forecasts released in March show a lower projected path for interest rates than before, there’s a good chance it’s because officials are a bit more concerned about their ability to keep the U.S. economy close to full employment than they were at the end of last year.

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