The November jobs report was mixed relative to expectations but still reflects a robust labor market. Job growth dipped below 200,000 while the unemployment rate was unchanged at 3.7 percent, a 49 year low. Average hourly earnings growth topped 3 percent year over year for the second consecutive month:

September real consumption increased for durable goods at a rate of 1.8 percent, the highest rate of growth since March, and for nondurable goods at 0.2 percent. Consumption of services, however, was flat, largely due to a 1.8 percent decline in food services consumption following big gains in prior months. Other discretionary categories of spending were mixed: recreational goods and vehicles rose at a rate of 2 percent from the prior month; recreational services declined by 0.1 percent; motor vehicle and parts increased by 3.1 percent; personal care services increased by 0.1 percent; clothing and footwear declined by 0.6percent; and spending on personal care products remained the same from August.

My colleagues and I recently analyzed every Federal Reserve interest rate increase episode between 1983 and 2015 and found several patterns emerge: bond yields rose, the yield curve flattened, the U.S. stock market either chopped sideways or rose, the U.S. dollar fell as frequently as it appreciated, and as the Fed raised rates from accommodative to a neutral monetary policy, the economy continued to grow, largely unaffected by the rate increases and removal of monetary accommodation. We also found that when the Fed tightened the money supply too much, the economic expansion tipped into recession.

Last week’s announcement of the second quarter (Q2) GDP numbers shows that the U.S. economy is in good shape. Real GDP advanced 4.1%, the fastest rate of growth since the third quarter of 2014. That puts average growth in the first half of 2018 at 3.1%.

Amid strong momentum in the economy and inflation virtually at the Fed’s longer-run 2 percent inflation target, the Fed is expected to increase its policy rate from 1.75 to 2.0 percent at the conclusion of its June 12-13 FOMC meeting, and announce the next step in its balance sheet normalization policy. Beginning in July, it will roll over maturing US Treasury securities that exceed $24 billion (up from $18 billion) during each calendar month and reinvest principal mortgage-backed security payments that exceed $16 billion (up from $12 billion). The Fed will also publish its quarterly Summary of Economic Projections and Fed Chairman Powell will host his second post-meeting press conference.

Encouraging data on U.S. consumers and businesses suggest that GDP growth is on pace for a rebound in Q2 after a shaky and quirky Q1.